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Earnings quality of Indonesian firms surrounding initial public offerings

Author

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  • Yanthi Hutagaol-Martowidjojo
  • Felita Widyanto

Abstract

This research aims to examine the changes in earnings quality of Indonesian firms transitioning from private to public companies by examining accounting-based attributes of earnings; accrual quality, earnings persistence, and earnings predictability, before and after IPO. Accrual quality is assessed using the abnormal accrual model and Dechow and Dichev (DD) model; earnings persistence and predictability are assessed through net income autoregressive model. Using 103 Indonesian non-finance IPO firms, this research concludes that earnings quality of IPO firms changed along with the alteration of their status from private to public firms. Post-IPO (after becoming public firms), the sample shows a higher quality of earnings in terms of accrual quality and earnings persistence increases after IPO. However, this research could not reject the hypothesis of decreasing post-IPO earnings predictability due to the nature of IPO firms.

Suggested Citation

  • Yanthi Hutagaol-Martowidjojo & Felita Widyanto, 2018. "Earnings quality of Indonesian firms surrounding initial public offerings," International Journal of Accounting, Auditing and Performance Evaluation, Inderscience Enterprises Ltd, vol. 14(1), pages 47-62.
    • Handle: RePEc:ids:ijaape:v:14:y:2018:i:1:p:47-62
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    Cited by:

    1. Tomasz Sosnowski, 2022. "Persistence of pre-IPO earnings of new companies from CEE stock markets," Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of Economic Research, vol. 17(2), pages 415-434, June.

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