An Empirical Study On The Impact Of Venture Capital On The Earnings Management Of Gem IPO Companies

In recent years, venture capital plays an important role in the global economic growth and academic research on VC has gradually increased. The successful launching of GEM in Shenzhen makes contribution to our multi-level capital market system. GEM not only provide financing services for small and medium-sized enterprises, but also supply a good way for the venture capital investors to exit their investment. So more and more venture capital choose helping SMEs to be listed on the GEM, so they can access to lucrative return on investment. However, in order to be listed on the GEM as soon as possible or raise the issue price, many enterprises take measures of earnings management to modify the financial statement. It hinders the capital market from playing a fundamental role in resources distribution and restricts the development of GEM.In this paper, I select 409 SMEs listed on the GEM during 2009 to 2014 as the sample, in order to delve into the effect of venture capital on earnings management of GEM IPOs. The results of the regression model show that earnings management is ubiquitous in GEM; VC-backed SMEs show less earnings management; risk investment institutions as important shareholders can also have inhibitory effect on earnings management behavior of listed companies; high reputation risk investment institutions can restrain earnings management; and the “Supervision effect” and “Authentication effect” exists in Shenzhen GEM.