The Study On The Relationship Between Pre-IPO Earnings Management And Underpricing In GEM

The emergence of the growth enterprise market not only enrich the domestic capital market, but also provides a better financing channel to companies in our country. Listed companies in the GEM have to obey many strict rules. And this leads to some companies take measures like earnings management before coming into market so that these companies which can not meet the requirements could still raise fund. At the same time, considering particularly serious phenomenon of IPO underpricing in GEM board, there are many problems to be solved:If there’s a correlation between both of them in GEM board. What impact the positive earnings management and the negative earnings management have on the IPO underpricing phenomenon. Because of the late issue, there is not too much research in GEM board. Base on the correlation, the paper could not only enrich the relative research, but also help investors to identify the behavior of pre-IPO earnings management in listed companies. And then they can reduce the risk of investment.The article separately from the following six parts to discuss the relationship between them. First, review the background, objective and significance of earnings management and IPO underpricing, and reference the literature both foreign and domestic, then research methods and main content of this article. Second, define the basic concept of earnings management and IPO underpricing, and elaborate the related theories. Third, in the form of descriptive statistics unfolds the characteristics and status of pre-IPO earnings management and IPO underpricing in GEM board, and use sufficient data to show the pre-IPO earnings management level in our country rise again and there is a high level of pre-IPO earnings management degree of high and new technology enterprise; and the IPO underpricing rate is higher than in other countries but shows a downward trend. The fourth, combined with background and the present situation of them in GEM board, hypothesized, and selected355listed companies as samples, first of all, build the management model by the financial indicators of balance sheet, income statement and statement of cash flows, through the regression and calculation, get there are300companies using positive earnings management, and there are55companies using negative earnings management, then use the IPO underpricing rate, the degree of earnings management and other5index as variable, set up the correlation model of it, then get the conclusion. The empirical results shows that there exists pre-IPO earnings management and IPO underpricing behavior in our country, the greater the positive earnings management, the greater the IPO underpricing; the smaller the negative earnings management, the greater the IPO underpricing. Therefore, on the basis of qualitative and quantitative analysis, give the advise of strengthen monitoring the IPO companies earnings management behavior in order to reduce the underpricing, we should sound the supervision of pre-IPO earnings management behavior, improve the information disclosure of GEM board, strengthen the penalties of excessive earnings management and standardize the internal governance structure of the companies in GEM board, and finally summed up the sixth part of the conclusion.