Research On The Impact Of Venture Capital On Earnings Management Of GEM Companies

The GEM in our country has been launched for 8 years.It provides a new financing and developing avenue for entrepreneurial enterprises and high-tech enterprises.At the same time,it provides a way for venture capital to exit after realizing investment income.The invested company appeared on the GEM successfully with the help of venture capital institution,and the venture capital institution realized their capital gain through selling down or reducing the shares of participating companies.In order to meet the listing rules as soon as possible,some companies use the method of increasing earnings management behavior to modify their financial statement.So,during this process,what role did the venture capital institution play?It’s a worthy problem to be further discussed.During the different stages in the process of the listing on the GEM,the company and their venture capital institution would influence the company’s earnings management behavior due to different purposes.Considering that most GEM companies will be banned for one year after listing to selling out their stock,this article divided the study period into four stages,including the year before the IPO,the IPO year,the lock-up period and the year after the lock-up period.And this article chose 251 companies listed on the GEM during 2011-2014 as samples,using the improved Jones Model to calculate the index to measure earnings management-Manipulative Accruals and using Stata12.0 to do the multivariate regression analysis to test the impact of venture capital institutions’ participation on earnings management in IPO.What’s more,this article researched the venture capital institutions’ features impact on earnings management in IPO,including whether it is a joint venture or not,whether the venture capital joint venture is a hybrid venture and whether it is a state-owned venture capital firm.The results showed that the GEM listed companies with shares of venture capital institutions had a lower impact on earnings management in the year before IPO,but a higher impact in the IPO year,the lock-up period and the year after the lock-up period.The company with the joint venture capital institution,hybrid joint venture capital institution and the stated-owned venture capital institution in listed companies had a lower earnings management.Based on the above conclusions,it is recommended that the GEM could strengthen the auditing standard and intensify the information disclosure system,the venture investment industry could set up a supervisory organization and strengthen their external supervision,our government could introduce policies of supporting and guiding the venture investment industry.