Effect Of Venture Capital To Earnings Management Of Listed Company Frome Our Country’s GEM IPO

In modern times, New technology revolution and industry revolution are pregnant withbreakthrough in the worldwide,and the depth integration of scientific and technologicalinnovation and industrial change has become one of the most prominent features of thecontemporary world. In the context of the high-tech industries are increasingly becoming thecore of economic development. The GEM(growth enterprise market) which was launched onOctober30,2009, reduees the listing requirements for innovative SMEs that with high-growthand high-risk,provids a perfect financing platform for SMEs,also provides a ideal investmentenvironment for venture capitalists,who maily invest capital to the innovative and hightechnology companies. therefore, venture capitalists pay close attention to the GEM. Asol theGEM offers an effective exit mechanism for ventur capital to achieve high returns, whichpromotes the venture capital of our country to a new development stage. But due to thelimited listing requirements, earning management behavior exits in almost all of thecampanies.Excessive earning management will hurt stakeholders, even damege the wholecapital market. From the perspective of risk investment,the author studied the relationship ofventure capital and earning management to find ways of restraining the earning managementbehavior in our country’s GEM.In the base of systematic review on the related theory and the research dynamic fromdomestic and foreign, This paper combines the methds of empirical and normative research,uses153IPO companies listed on China’s GEM during the period of2009-2010as thesample. The author calculates the GEM’S degree of earnings management through themodified Jones model in the prosess of IPO. Then the author makes a descriptive analysis anda Paired Sample T test about venture capital invested groups and none venture capital investedgroups.Thirdly,the author makes a further analysis about the effect of Venture capitalshareholding and the number of risk investment to the degree of the earning management.In the end of this paper,It comes to the conclusions that the phenomenon of earningsmanagement is prevalence in China’s GEM listed companies in the process of IPO; To someextent,the participation of venture capital can reduce the degree of companies’ earningsmanagement in the process of IPO; If there are more venture capitalists and higher venture capital shareholding, the degree of earnings management will be much lower. At last, basedon the conclusions, the author makes some suggestions which are from the point ofstrengthening the development of the venture capital and GEM, to inhibit earningsmanagement behavior.In this paper,the correlation research, which is about the relationship between venture capitaland the GEM companies’ Earnings Management,provides a theoretical basis for the healthydevelopment of the gem listed companies,and to improve the system of gem IPO of listedcompany. Also it’s useful to improve the quality of the growth enterprise market of listingCorporation IPO’s disclosed accounting information,to help the investors to provide a basisfor formulating the correct investment decision, and has a practical significance for normingand maintaining the capital market to develop healthily.