Research On The Influencing Factors And The Consequences Of Earnings Management Before IPO

Initial public offerings(IPO)is a hot topic for domestic and foreign scholars.In recent years,domestic academic circles concentrates on the phenomenon of the high issue PE ratio and the declining performance after IPO.The most important basis for investors to judge the company's value is the financial information before listing.Therefore,in order to successfully list and get higher issue PE ratio,IPO enterprises have a motivation to conduct earnings management to beautify the financial information.This paper studies from the following aspects: Does the enterprises have earnings management behavior before IPO? How to use the two methods of the earnings management? What have influenced the earnings management of IPO enterprises? What is the relationship between earnings management before IPO and the high issue PE ratio and the declining performance?By reorganizing the literature,this paper puts forward six hypotheses.Basing on the sample of 1454 IPO companies in A-Share market from 2006 to 2016,this paper measures the accrual earnings management by discretionary accruals calculated by Modified-Jones Model(Dechow et al.,1995)and the real earnings management by the abnormal cash flow,abnormal production costs and abnormal discretionary expenses calculated by the model of the real earnings management(Roychowdhury,2006).Using stataMP 14 software to calculate cross-sectional data of different industries by year,this paper constructs OLS linear regression model to empirically test the theory and the hypotheses.The study concludes that there exists earnings management before IPO enterprises go public.Earnings management before IPO is influenced by both internal and external factors,which eventually leads to the high issue PE ratio and the declining performance.The conclusion of this paper helps to systematically understand the earnings management of enterprises before IPO,and plays a positive role in enriching the investor investment theory and strengthening securities supervision.