The accuracy of earnings forecast in IPO prospectuses: Evidence from Indonesia

Sendhy Saputra, Inten Meutia, Tertiarto Wahyudi

Abstract


The financial information that attracts the attention of most investors is the earnings forecast. Because investors are more interested in the company's prospects in the future than historical information. But in reality earnings forecast is less accurate, while the factors that are suspected to influence give inconsistent findings. This study aims to determine the effect of the forecast horizon, underwriter reputation, auditor reputation, company size, company age, leverage ratio, industry type and IPO market on the accuracy of earnings forecast. The population of all companies that IPO in Indonesia Stock Exchange period 2015-2018, were selected using the purposive sampling method, obtained 107 samples. Secondary data were obtained from the company's prospectus and annual report. The analytical method used is multiple regression. The accuracy level of earnings forecasts is measured using forecast error numbers. Mean forecast error 28.86 percent is reported over the entire sample period. Then only underwriter reputation and company size have a significant positive effect on the accuracy of earnings forecasts. And the hot IPO market has a negative effect on the accuracy of earnings forecasts. The implications of research show that underwriter reputation, company size, and IPO market became the important indicators in determining investment strategies in IPO shares.

JEL Classification: D82, G14, G17, R53

DOI: https://doi.org/10.26905/jkdp.v23i4.3509


Keywords


Accuracy; Earnings forecast; Hot (Cold) IPO

Full Text:

PDF

References


Ahmad‐Zaluki, N. A., & Wan‐Hussin, W. N. (2010). Corporate governance and earnings forecasts accuracy. Asian Review of Accounting, 18(1), 50-67. http://dx.doi.org/10.1108/13217341011046006

Amer, M. A., & Ahmad-Zaluki, N. A. (2017). The effect of disclosure regulation on the bias and accuracy of management earnings forecasts in Malaysian IPO prospectuses. Journal of Financial Reporting and Accounting, 15(1), 59-77.

http://dx.doi.org/10.1108/JFRA-11-2015-0099

Ammer, M. A., & Alsahlawi, A. M. (2018). An empirical investigation into the impact of Shari’ah-compliant status and Muslim directorship on the accuracy of IPO management earnings forecasts. International Journal of Islam and Middle Eastern Finance and Management, 12(1), 56-75. https://doi.org/10.1108/IMEFM-07-2017-0174

Arifin, Z. (2010). Potret IPO di Bursa Efek Indonesia. Jurnal Siasat Bisnis, 14(1), 89–100.

Beaver, W. H. (2002). Perspective on recent capital market research. The Accounting Review, 77(2), 453-474. https://doi.org/10.2308/accr.2002.77.2.453

Bedard, J., Coulumbe, D., & Courteau, L. (2008). Audit committee underpricing IPO’s and accuracy management earnings forecasts. Corporate Governance: An International Review, 16(6), 519-535. https://doi.org/10.1111/j.1467-8683.2008.00708.x

Boubaker, S., Gounopoulos, D., Kallias, A., & Kallias, K. (2016). Management earnings forecasts and IPO performance: evidence of a regime change. Review of Quantitative Finance and Accounting, 48(4), 1083-1121. https://doi.org/10.1007/s11156-016-0579-8

Cazavan‐Jeny, A., & Jeanjean, T. (2007). Levels of voluntary disclosure in IPO prospectuses: an empirical analysis. Review of Accounting and Finance, 6(2), 131–149. https://doi.org/10.1108/14757700710750810

Firth, M. (1997). An analysis of the stock market performance of new issues in New Zealand. Pacific-Basin Finance Journal, 5(1), 63-85.

https://doi.org/10.1016/s0927-538x(96)00026-1

Firth, M., Gounopoulos, D. & Pulm, J. (2012). IFRS adoption and management earnings forecasts of Australian IPOs. Working paper. University of Barcelona, Barcelona. https://doi.org/10.2139/ssrn.2199034

Firth, M., Kwok, B., Liau-Tan, C. K. & Yeo, G. H. (1995). Accuracy of profit forecasts contained in IPO prospectuses. Accounting and Business Review, 2(1), 55-83.

Gounopoulos, D. (2011). Associations between management forecast accuracy and pricing of IPOs in Athens Stock Exchange. Multinational Finance Journal, 15(3/4), 235-272. https://doi.org/10.17578/15-3/4-4

Hammami, M. & Sioud, O. B. (2014). The reliability of management earnings forecasts in IPO prospectuses: A study of managers forecasting preferences. International Journal of Social, Behavioral, Educational, Economic, Business and Industrial Engineering, 8(6), 1632-1641.

Hasan, T., Hadad, M., Ahmed, K. (2016). The accuracy of management profit forecasts in IPO prospectuses. Journal of Accounting in Emerging Economies, 6(1), 2–12. https://doi.org/10.1108/JAEE-02-2013-0010

Jelic, R. (2014). Management Forecasts and IPO Performance. Working Paper. University of Birmingham – Business School.

Lee, P. J., Taylor, S. J. & Taylor, S. L. (2006). Auditor conservatism and audit quality: evidence from IPO earnings forecasts. International Journal of Auditing, 10(3), 183-199. https://doi.org/10.2139/ssrn.297825

Karim, A. K. M. W., Ahmed, K. & Hasan, T. (2013). Impact of audit quality and ownership structure on the bias and accuracy of earnings forecasts issued in IPO prospectuses.Journal Studies in Economics and Finance, Vol. 30 No. 4, 2013 pp. 288-316. https://doi.org/10.1108/SEF-10-2012-0113

Krismasary, F. I. (2015). Reputasi underwriter dan reputasi auditor dalam menentukan underpricing ketika initial public offering (IPO) (Studi empiris pada perusahaan yang go public tahun 2010-2012). Thesis. Universitas Lampung.

Kristiantari, I. D. (2013). Analisis faktor- faktor yang mempengaruhi underpricing saham pada penawaran saham perdana di Bursa Efek Indonesia. Jurnal Ilmiah Akuntansi dan Humanika, 2(2), 785-811. http://dx.doi.org/10.23887/jinah.v2i2.1672

Lismawati & Munawaroh. (2015). Faktor-Faktor yang mempengaruhi underpricing saham pada penawaran saham perdana di Bursa Efek Indonesia. Jurnal Akuntansi Bisnis, 2(2), 1-13. https://doi.org/10.35137/jabk.v2i2.35

Lonkani, R., & Firth, M. (2005).The accuracy of IPO earnings forecasts in Thailand and their relationships with stock market valuation. Accounting and Business Research, 35(3), 269-286. https://doi.org/10.1080/00014788.2005.9729991

Marofen, R. & Khairunnisa. (2015). Pengaruh reputasi underwriter, listing delay, umur perusahaan, profitabilitas, dan financial leverage terhadap underpricing saham perdana. e-Proceeding of Management, 2(1), 289-296.

McGuinness, P. B. (2005). A re-examination of the disclosure of discretionary earnings forecasts: The case of initial public offerings in Hong Kong. SFC Quarterly Bulletin, Summer, 10-31.

Robinson & Pangestuti, I. R. D. (2015). Analisis faktor-faktor yang mempengaruhi stock underperformance IPO pada perusahaan yang listing di Bursa Efek Indonesia tahun 1998-2012. Diponegoro Journal of Management, 4(2), 1-14.

Sunariyah. (2002). Ketepatan ramalan laba di prospektus pada awal penawaran umum di pasar modal Indonesia. Kelola, 5, 180-199.

Warganegara, D. S., & Warganegara, D. L. (2014). Do IPO Hot and Cold Markets exist at the Indonesia Stock Exchange? Binus Business Review, 5(2), 484-496. https://doi.org/10.21512/bbr.v5i2.1007

Morris, R. D. (1987). Signaling, agency theory, accounting policy choice. Accounting and Business Research, 18(69), 47-56. https://doi.org/10.1080/00014788.1987.9729347




DOI: https://doi.org/10.26905/jkdp.v23i4.3509

Refbacks

  • There are currently no refbacks.


Bookmark and Share


Jurnal Keuangan dan Perbankan (Journal of Finance and Banking)

Diploma Program of Banking and Finance, Faculty of Economics and Business, University of Merdeka Malang

Published by University of Merdeka Malang

Mailing Address:
2nd floor Finance and Banking Building, Jl. Terusan Raya Dieng No. 57 Malang, East Java, Indonesia
Phone: -
Email: [email protected]

This work is licensed under a Creative
Commons Attribution-ShareAlike 4.0