Financial manipulation in seasoned equity offerings: evidence from Turkey

Abstract

Purpose- This study aims to search whether financial manipulation practices was performed on Seasoned Equity Offerings (seos) by 41 firms in Borsa Istanbul for the 2010-2015 period. Methodology- Probit analysis and Beneish (1999) model were used in the study. 9 financial ratios were used as independent variables in the probit model in order to find out wheter the firms make manipulation through these ratios. For the purpose of estimating sample firms’ tendency for manipulation clustering analysis was also used. Manipulation possibilities were calculated for each firms. Finally based on average index values, firms were grouped as a having high and low manipulation tendency. Findings- In the model, based on an event study conducted via the bulletins and reports of BIST and SPK, 20 firms were considered as manipulator while the remaining considered as control firms. It was observed that most of manipulation techniques (%89) were made in order to increase period profit. Conclusion- It has been confirmed that firms that conducted seos applied the financial manipulation techniques during the analysis period. 3 independent variables include Asset Quality Index, Inventories / Net Sales Index and Total Accruals / Total Assets index were found to be statistically significant in determining whether firms apply financial manipulation. Based on the robustness test, the model’s estimating power was calculated as %70.23. According to the model’s reliability test, 11 firms were found as a having high manipulation tendency. This finding refers success rate for estimating manipulator firms in our model is % 55 (11/20).