Growth Without Capability: Firm Expansion, Biological Asset Valuation and the Post Listing Erosion of Financial Reporting Quality in Zambia’s First Listed State-Owned Enterprise

The governance literature treats firm size as a reliable correlate of financial reporting quality and stock market listing as a durable disciplining mechanism. This study tests both propositions within the underexplored context of a listed state-owned enterprise operating in the forestry sector of a low-income African economy. Using six years of post-listing data from Zambia Forestry and Forest Industries Corporation Plc, the first state-owned enterprise listed on the Lusaka Securities Exchange, the study examines the relationship between firm size and financial reporting quality and evaluates whether reporting quality differed between the early and later post-listing periods. Financial reporting quality is proxied by the ratio of operating cash flow to net income. Given the limited dataset of six annual observations, the analysis employs bivariate correlation and one-way analysis of variance, supported by qualitative analysis of governance documents and stakeholder perspectives. The findings reveal a strong negative association between firm size and financial reporting quality, with a Pearson correlation coefficient of -0.741, significant at the 10 percent level, explaining approximately 55 percent of the variation in reporting quality. Mean reporting quality declined from 0.131 during 2018–2020 to 0.049 during 2021–2023, with the difference statistically significant at the 5 percent level and an eta squared of 0.775. The results suggest that rapid, valuation-intensive asset growth, driven largely by biological assets measured at fair value under International Accounting Standard (IAS) 41, exceeded the accounting and audit capabilities established at listing, weakening the relationship between reported earnings and operating cash flows. The study qualifies the conventional firm-size effect, demonstrates that listing discipline depreciates over time rather than remaining permanent, and provides important implications for securities regulators, government shareholders, and boards of state-owned enterprises in African capital markets. The findings are indicative rather than conclusive and are proposed as a basis for future panel-data research.