Title: Earnings quality of Indonesian firms surrounding initial public offerings

Authors: Yanthi Hutagaol-Martowidjojo; Felita Widyanto

Addresses: International Accounting and Finance Program, Bina Nusantara University, Joseph Wibowo Center, Jl. Hang Lekir 1, No. 6, Senayan, 12720 Jakarta, Indonesia ' International Accounting and Finance Program, Bina Nusantara University, Joseph Wibowo Center, Jl. Hang Lekir 1, No. 6, Senayan, 12720 Jakarta, Indonesia

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.

Keywords: earnings quality; initial public offerings; IPOs; accrual quality; earnings persistence; earnings predictability; Indonesia.

DOI: 10.1504/IJAAPE.2018.089413

International Journal of Accounting, Auditing and Performance Evaluation, 2018 Vol.14 No.1, pp.47 - 62

Accepted: 02 Mar 2017
Published online: 17 Jan 2018 *

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