Research On The Surplus Management Of Listed Companies

Earnings management refers to the use of professional judgment with respect to theaccounting policy choices and changes by the manager, so as to achieve the purpose ofself-management goals. A Pre-IPO firm is highly likely to manipulate the financial situationsdisclosure in the Prospectus, in order to meet the financial indicator requirements by SEC.This manipulation might be accomplished by the real earnings management behavior, accrualsearnings management and etc. Whatever method applied, earnings management behavior willaffect the quality of information disclosure, mislead investors and regulators’ understandingabout the financial condition of the issuer, affect investors’ confidence and harm the interestsof investors.Down to our growth enterprises market, the crowded IPO channel and single financial auditindicators motivated the issuer to perform earnings management during the IPO process. Theissuer is highly likely to intentionally adjust the main business income and net profitdistribution as of the reporting period to meet the growth requirement. Many companies listedon GEM kept good growth in the reporting period. However, their performance dramaticallydeclined after the listing also corroborated the author’s speculation.In order to investigate the existence of GEM IPO companies with earnings managementbehavior during the reporting period, and analyze the impact of the behavior on theperformance of the company, the paper applies financial data of GEM IPO companies’ intoempirical research. Using the modified Jones model, the paper classifies accrual earnings tomeasure the degree of earning management. Then, the author verifies the extent of the impactof earnings management on future performance thorough multiple regression analysis. Theempirical results show that the positive earnings management behavior is present in thereporting period, and the behavior mentioned above will exert negative impact on the resultsafter the listing.