Earnings quality and national IPO: Central Asian case

Abstract

Object: The study aims to assess the impact of the National IPO/SPO Program on Earnings quality in KASE-listed companies and provide recommendations to the investor community. Methods: KASE Stock Exchange sample population is 52 local companies, 26 state and 26 private, across different industries excluding financial institutions and investment holdings. Time horizon is 13 years during 2009‒2021 period totaling 572 unbalanced panel firm-year observations. To estimate Earnings quality, we follow (Kasznik, 1999) cash flow model for accrual-based Earnings management jointly with real activity (Roychowdhury, 2006) aggregate model. Findings: We found that the National IPO/SPO process creates partial state-owned enterprises and improve their key investment indicators. Conclusions: Partially state-owned companies outperform private ones and thus become the preferable investment strategy based on Earnings quality risk, cash generation, profitability and leverage-based risk. Theoretically, this study is the first to analyze Earnings management from the National IPO/SPO perspective and the first to relate Earnings quality with structure ownership in case of Kazakhstan. Practically, results and discussion are useful for investors of KASE-listed companies in investment decision-making.