Earning Quality after Privatization & Its Drivers: A Comparison between Private-owned and State-owned Public Companies

Since mid-90s scale privatization have brought about positive benefits such as higher productivity, unemployment avoidance, and efficient governance structure. However, the paper finds earning quality decreases after privatization. The drivers are both operating environment and manager´s opportunism. But different environment factor and discretionary factor contribute difference. Based on both private owned public company and its pair sample and only private owned public company sample, environmental factors show different effects while size, operating cycle and negative profit ratio indicates insignificant effect, and discretionary accrual presents significant effect on earning quality decreases. The result suggests manager´s opportunism is an important driver.