Research On Comparison Of The Financial Performance Before And After IPO About The Chinese Listed Companies In GEM

On October30,2009, the Chinese Growth Enterprise Market (GEM) wasborn in Shenzhen Stock Exchange. The establishment of GEM, not only providesa new financing channel for SMEs and high potential emerging companies ofChina, alleviating its financing difficulties, but also provides a formal exitmechanism for venture capital. Majority of SMEs get more developmentopportunities in GEM. And SMEs will have a bright future in GEM. Since theGEM established,“Three high phenomenon (high issue price, highprice-earnings ratio, high raise account)” and “Break pricing phenomenon” arevery serious. GEM has big risk, so its future profitability and development aremore difficult to predict. Based on this, this article aims to select the listedcompanies of GEM as research sample, and measure the changes of financialperformance before and after IPO, and explore whether IPO bringing betterdevelopment for the listed companies of GEM. It is not only helpful tosustainable management and development of listed companies, but also helpfulto improve the GEM and the whole financial performance.Based on245listed companies landed on the GEM in2010-2011assamples, this article has comparative study on the financial performance beforeand after IPO of listed companies of GEM by theoretical analysis and empiricalmethods. The empirical studies include verification of “IPO effect”(the financialperformance significantly declines after IPO) of listed companies of GEM、thesingle factor variance F test of financial performance changes before and afterIPO and regression analysis of the factors which affect the changes of financialperformance before and after IPO.In this article, the innovation is that, on the one hand, this article researchesthe overall sample and group samples which divided by the background ofventure capital and industry attributes, and study the different manifestations in the changes of financial performance under the influence of the background ofventure capital and industry attributes; on the other hand, in order to make acomprehensive analysis of the financial performance, this article bases onunilateral indicators to construct a comprehensive financial evaluation indicators.The empirical results show that:“IPO effect” exists in overall samples(indicators of financial performance decreased after IPO), companies whetherwith the background of venture capital or not exist “IPO effect”，but industrieswith different properties have different performance in “IPO effect”, only themanufacturing industry and the information technology industry show asignificant “IPO effect”; debt risk of the overall sample and group sampleswhether with the background of venture capital or not significantly becomebetter after IPO, but profitability, asset quality and operating growth significantlybecome worse, and the industry with different properties have differentperformance; venture capital has not played a significant role in “screening”effect before IPO, companies with venture capital and companies withnon-venture capital had no significant difference in financial performance beforeIPO; venture capital also had not played its effects in supervision and promotionafter IPO, financial performance of companies with venture capital had declinedgreater than that of companies with non-venture capital after IPO; the regressionanalysis shows that the background of venture capital is not the main factoraffecting the change of financial performance of the listed companies; butindustry properties could affect the financial performance of the companies listedin GEM.Based on the analysis and results, this article puts some relevant policysuggestions for improving the listed companies’ overall quality and financialperformance.