Accrual Quality of Indonesian Firms Before and After Initial Public Offerings

Changing from a private to a public firm will change the financial reporting environment of a company. More stakeholders and regulations demand high-quality financial reports. Using Indonesian quoted non-finance and related industry IPO firms, this study purports to examine the change in reported earnings quality, measured by accrual quality, before and after the IPOs. Based on the discretionary-accrual model, we find that there is no difference of accrual quality before and after IPO. However, as we hypothesized, based on cash-flow model, the result shows that accrual quality increases after IPO due to diminishing of unintentional accrual estimation errors after IPO.