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This paper analyses the relationship between real and accrual earnings management activities and IPO failure risk. While the association between accrual earnings management and IPO failure has been researched in a limited setting, to date, there has been no work that analyses the impact of real activities-based manipulation on the probability of IPO failure. Based on a sample of 570 UK IPO firms that went public over the period 1998�2008, we find evidence that IPO firms manipulate earnings upward utilising real and accrual earnings management during the IPO year. We also find that IPO firms with high levels of real and/or accrual earnings management during the IPO year have a higher probability of IPO failure and lower survival rates in subsequent periods. In addition, we find that IPO firms experience a higher probability of IPO failure and lower survival rates in the post-IPO period when greater real earnings management takes place during the IPO as compared to accrual earnings management. While our work contributes to the growing literature on real and accrual earnings management around IPOs, the majority of our failed IPO events are from the Alternative Investment Market and occur during the financial crisis. Future research, therefore, should consider whether these results are generalisable to more developed firms and less turbulent economic environments.
