Research On The Relationship Between Earnings Management Behavior And Performance Of GEM Listed Companies In IPO

On October 30,2009,China’s GEM officially opened.The establishment of GEM brings favorable financing opportunities for many SMEs,especially for those with the characteristics of "two high and six new".On August 18,2017,672 GEM companies were listed,with a total market value of 5.08 trillion yuan and an average P-E ratio of50.03.However,in the development process of GEM,we find that there are serious phenomena of "high issuing price,high P/E ratio and high over-offering".In order to obtain scarce listing qualifications and raise more funds by raising stock prices,enterprises have strong motivation to carry out earnings management so as to manipulate corporate performance.At present,the role of earnings management behavior of GEM on performance during the course of IPO has not been concluded.According to the existing research,most scholars believe that earnings management behavior can only mechanically improve the performance of GEM in the year of IPO,but it will reduce the company’s later performance,which is not conducive to the company’s long-term operation.A few scholars believe that moderate earnings management has a positive effect on corporate performance,and has no obvious inhibition on later performance.Therefore,the purpose of this study is to explore the relationship between earnings management behavior and performance of GEM listed companies.By reviewing the literature on earnings management,we can see that there are many studies on the accrued earnings management,but less on the real earnings management in China.Therefore,this paper introduces the revised Jones model and Roychowdhury model to measure the degree of accrued and real earnings management respectively,exploring whether there are these two kinds of earnings management behaviors in GEM during the year of IPO and the following five years.If they exist,what are their orientations and how do they affect corporate performance?By referring to the literature on the relationship between earnings management and GEM performance,it is found that different scholars have different methods to measure corporate performance,which may be one of the reasons for the different conclusions.This paper uses factor analysis method,selecting 16 indicators to measure profitability,solvency,operation ability and development ability.Then,extracts public factors from them and use this factor score to represent company performance,which can reflect the company’s operating performance more comprehensively and make the conclusion more accurate.By reviewing the literature on the industry characteristics of GEM companies,it is found that there are obvious differences in sales growth,profit and R&D expenditure among different industry companies.In order to understand the relationship between IPO earnings management behavior and GEM performance more deeply and accurately,based on the industry classification criteria of China Securities Regulatory Commission(CSRC)in 2012,this paper reclassifies GEM listed companies into four categories:assets-in-place firms,service and culturefirms,technology-based firms,science-based firms,attempting to explore the similarities and differences of IPO earnings management behavior of GEM listed companies in different industries and how these behavior affect corporate performance.The results of this study show that there are both accrual and real earnings management behaviors in GEM listed companies in the year of IPO and the next five years,and the degree of accrual earnings management is the highest in the year of IPO.At the same time,the direction and degree of earnings management of GEM listed companies in different industries are different in the year of IPO and the next five years.In addition,the accrued earnings management behavior of GEM listed companies is not related to the overall performance,while the real earnings management behavior is negatively related to the overall performance,and the overall performance shows a trend of rising first and then declining.Moreover,the relationship between IPO accruals and real earnings management behavior and performance of GEM listed companies is different in different industries.At last,on the basis of the research results,according to the problems in the GEM market,this paper puts forward relevant countermeasures and suggestions.