The Studies Of The Gem Listing Companies’Earnings Management During Initial Public Offering

Listed companies have the motivation to do earnings management in the process of initial public offering. The listing conditions will influence the way how the listed companies do earnings management. Compared with the main market. GEM lowered the listing conditions of profitability, at the same time stressed innovation and growth. So the listing companies of GEM will weigh in these three when doing earnings management. How much listed companies doing earnings management was not control by the enterprise only. It was influenced by the underwriters, auditors and risk investors.The paper measure degree of the accrual earnings management and real earnings management by the cross section modified Jones model and improved Roychowdhury model with those enterprises which was listed in GEM among2009and2010. The paper contrasted and analyzed the impact of the underwriters, auditors and risk investor on corporate earnings management by Z-test.The empirical results show that the GEM listed companies did the positive accrued earnings management. The GEM listed companies expanded production and controlled costs to show its innovation and growth. The accrual earnings management degree mean of the GEM listed companies during the pre-ipo three years was4.52%,3.15%and4.18%. Real earnings management degree of fee control was5.18%,1.19%and0.58%; Degree of cost control was3.69%,2.31%and2.86%. Through the comparison, the reputation of underwriter did not have inhibitory effect to accrued earnings management as expected. The auditor had inhibitory effect to earnings management by the year before IPO only, while the auditors had no significant inhibitory effect on the real earnings management. Risk investors had inhibitory effect on the real and accrued earnings management. The paper raised several policy suggestion based on the degree of earnings management and impact on earnings management by underwriters, auditors and risk investors.