9. Understanding the Role of Initial Public Offerings in Financial Manipulation: Institutionalization or Cautiousness?

In recent years, it is observed that there has been an increase in enterprises that have initial public offerings (IPO) on Istanbul Stock Exchange (ISE). In IPO process, it is significant for firms to show strong financial position in their prospectuses to be approved by officials and to attract investors. Although it is expected that firms are cautiously and transparently prepare their prospectuses because they are legally responsible for information in prospectuses, they may sometimes manipulate their financial statements in the prospectuses to show strong financial position. On the other hand, it is theoretically assumed that firms become more institutionalized through IPO process and the tendency of institutionalized firms to manipulate financial statements becomes lower. However, it is known that there are institutionalized firms that conducted financial manipulation in the past. In this sense, this study aims to analyze how does the financial manipulation behavior of firms in Türkiye differs before and after the IPO? To this end, two different samples consisting of Turkish firms were analyzed by Beneish M Score model and differences between 2020, 2021, and 2022 years in terms of financial manipulation possibility were investigated by one-way Anova and Kruskal Wallis tests. The tendency of firms to conduct financial manipulation is lower in pre-IPO period than in post-IPO period. Also, it can be said that the average of enterprises is below the critical threshold which means that there is no strong evidence indicating that they are manipulator enterprises.