| Since China’s first franchised Venture Capital financial enterprises-China New Technology Venture Investment Company has set up in1985, Venture Capital has been considerable development in China. Especially after2000, the pace of development by leaps and bounds. To2010, there are720Venture Capital Enterprise (or Fund) in China, of which the funds under management totaled240.66billion yuan. Venture capital institutions from the beginning of a single government background, gradually developed to the coexistence of private and foreign investment, joint ventures and other forms.The purposes of this study are as follows:First, we tested whether the venture capital has a significant impact on the enterprises earnings management of the sample enterprises in the first year after IPO by dividing the sample enterprises of small plates into two types of venture capital holdings and no venture capital holdings.Second, we studied the relationship between earnings management and the venture capital characteristics by classification of venture capitals. Then we discussed the different effects of different venture capital institutions on the extent of earnings management.The empirical research in this paper found that the venture capital has significant negative impact on explanatory variables DTAC, which means venture capital can play a supervisory role effectively and reduce the level of earnings management by participation in the Board of Directors and the provision of management consulting. The longer venture capital involved, the better the effect is. All the Venture board members, whether joint investment, the nature of venture capital, venture capital reputation ranking have no significant impact on the extent of earnings management. The article is organized as follows:The first part is the introduction. In which we described the research background, significance, research content, innovation and lack of research, research ideas and paper’s framework.The second part of this article is mainly about the theoretical foundation and institutional background. First we introduced the management theory and the theory of corporate governance, generalized the earnings management constraints and focused on the relationship between the internal governance structure and earnings management. Then we introduced the overview and development of China’s Venture Capital and Small plates. Finally, we summarized the above theory and related systems, analyzed the logical relationship among venture capital, corporate governance and earnings management, by which we established the theoretical basis of the study.The third part is about the literature review. We summed up the venture capital’s impact on enterprises by summarizing the relevant literature, including adverse selection hypothesis, monitoring hypothesis and by-name effect. Through analyzing and reviews, this paper is going to use "monitoring hypothesis" as theoretical basis. We believe in that in this paper:(1), Venture Capital institutions will filter the invested enterprises, and most of the venture capital background enterprises have higher earnings quality.(2), Venture Capital institutions involved in the management by holding corporate shares or to join the Board. Finally, venture capital can improve the corporate governance structure and reduce the extent of earnings management.(3), Venture capital with high reputation is more attractive to the better Certified Public Accountants and the Securities and underwriters, and then help enterprises to reduce the level of earnings management.(4), Foreign venture capital institutions have a more mature operation mechanism and require a faster return, so they always use the way of joint investment and several rounds of investment and the arrangements of the corporate governance structure is more reasonable.The fourth section is about the design of this study. We put forward the hypothesizes of this article by theoretical analysis. H1, the extent of earnings management of company with venture investment institutions background is lower than the company without venture investment institutions background. H2, if there is director from venture capital institutions in the board, the extent of earnings management will be low in the first year after IPO. H3, the Venture capital institutions holding time is negative related and Earnings Management.H4, the combination of venture capital can restrain the earnings management. H5, The ability of restraining the earnings management of Government background, private background and foreign background is in order of decreasing. H6, the venture capital with high reputation can restrain the earnings management. Then we introduced the sample selection, data sources, the selection of variables and the design of the model.In order to test the above hypothesis, we used the modified Jones model to calculate the DTAC as explanatory variables and established two models to measure the level of earnings management. We selected the2009-2011listed companies from small plates as research subjects. Because Small most enterprises in small plates are concentrated in the manufacturing industry and the IT industry, so we only selected the two industries as the study sample.The fifth part is about the descriptive statistics. In order to provide statistical data support to the findings, we made the statistical analysis of industry distribution of venture capital institutions, Institutional ownership profile of Venture Capital, characteristics of Venture Capital and earnings management situation.The sixth part is about the empirical results. We made regression of the two models, and the results are as follows:1, The VC explained variable DTAC significant negative correlation, which means Venture capital holdings significantly influence the level of earnings management sample enterprises.2, The VC holdings time explained variable DTAC significant negative correlation, which means the longer venture capital involved, the better the effect of restraining the earnings management is. Hypothesis3has been proven.3, The co-investment of Venture capital has a significant negative correlation with DTAC.4, The reputation of Venture capital has a significant negative correlation with DTAC.5, Whether the Venture capital sent members to the board has a certain influence on the degree of earnings management, but not significantly.Part Ⅵ is about the conclusion and outlook. We made a more comprehensive overview and analysis of the research, and put forward suggestions and research inadequacies in this part.The major contribution and innovation of this article is to: First, this paper studied role of VC in changing the corporate governance structure to restrain the corporate earnings management after IPO, which is innovative in some degree. Currently, most of the researches are about VC and IPO, VC and market performance, VC and the board of directors. Apparently, there are few researches studying the period after IPO, so this paper is innovative in some degree.Second, This paper classified venture capital institutions into types, and further discussed the relationship between the classification of venture capital institutions and the corporate earnings management.The inadequacies of this article are as follow:1, This paper only studied the samples and data of the industry of manufacturing and information technology, and we are not sure whether the conclusions conformity to the other industries yet.2, This study focused on the listed companies from the small plates to study the relationship between venture capital institutions and the extent of earnings management, which is limited without studying the GEM. Hope the coming study can check the GEM, to make sure whether the results of this paper do work to the listed companies in GEM or not. |
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