Choice Or Supervision:Underwriter Reputation Damage And IPO Earnings Management

Earnings management is a fraudulent act of whitewashing corporate financial data in the process of financial reporting by corporate managers for personal interests,and it is common in the process of IPO issuance.In recent years,IPO frauds such as Greenland,Shengjingshanhe,Wanfu Shengke,Xintai Electric,and Kangmei Pharmaceutical have frequently occurred.These frauds are all related to the earnings management of IPO companies.In order to protect the interests of investors,effective measures have been taken to protect IPO companies.Effective control of the level of earnings management is imminent.Under the registration system,the future direction of my country’s IPO issuance,regulators only conduct formal review of IPO companies and no longer conduct substantive reviews on sustained profitability.Underwriters have become the first gate for companies to go public.,Is the"gatekeeper" of the capital market.It is particularly important that the underwriters can identify whether IPO companies are financially fraudulent,whether they can control the degree of IPO corporate earnings management,and whether they can play the role of financial intermediary.In order to further investigate whether underwriters can perform well as financial intermediaries,this article takes the underwriters as the research object,and selects the incidents of administrative penalties received by the underwriters by the China Securities Regulatory Commission and take companies from January 1,2005 to December 31,2019 as a sample.Through the multi-point DID model,the relationship between the underwriter’s reputation damage and the future IPO corporate earnings management level will be explored.The study found that:(1)the future earnings management of the IPO companies undertaken by the underwriters after the damage to their reputation will be significantly reduced;(2)the underwriters with a large market share will have a significant degree of earnings management for the future IPO companies after the reputation is damaged This phenomenon is not found in underwriters with a small market share;(3)Underwriters with a large market share will choose companies with low earnings management motivation to undertake the role of selection after the reputation is damaged,thereby reducing the degree of earnings management of IPO companies in the future.