The Study On The Relationship Between Venture Capital And Earnings Management On SME Board

The existing literature on the relationship between venture capital and earnings management mainly focus on the IPO stage which based on the assumptions that the venture capital can exit immediately. However our existing mandatory locking policy shows that risk investment can not immediately withdraw from the market. The relevant data also shows the ratio that the VC drops out in five years is only50%. Based on this, this paper try to study the VC and earnings management on listing corporation from a new light, and further study the characteristics of VC impact on earnings management.Using the2006-2011listed corporation in SME as research sample, this paper starts with some relevant theories, then uses the modified Jones model to measure the earnings management of listed company. The result declares the listed companies generally underway earnings management. Comparative analysis of all samples, sample of the lock up and samples after ban, the result points out the earning management of lock samples that have VC involved in is greater than that not involved in. besides, the results of ban samples is not significant.On the basis of above research, the paper continue to study the characteristics of risk investment (the ratio, state-owned background, joint investment) on the impact of earnings management on the lock up period samples. Controlling related variables, the multiple regression analysis show that the shareholding of VC with earnings management has a significant positive correlation. The earnings management behavior compared to the state-owned of the background of venture capital is more conducive to the supervision of the listed corporation. The result can’t manifest that the joint VC contributes to the earnings management behavior to supervise company.This paper supplies a new perspective for researching venture capital. besides, the research will provide certain enlightenment to the supervision department about the supervision and management in venture capital and the two-level market. For example, Multiple index comprehensive assessment can be used to been replaced the original single evaluation index so that increase the listed corporation’s cost of earnings management. While the conclusion of this paper showed that the effect of venture capital shows more moral risk, supervision departments should supervise the listed corporation and strengthen in the lock-up period due to the earnings management is more obvious.