Earnings quality of Indonesian firms surrounding initial public offerings

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.