A Study On Earnings Management Of IPO Based On The GEM Market

The economic problem of SMEs has been the biggest bottleneck constraints thedevelopment of SMEs for a long time, and the main reasons of the financing difficultiesof SMEs is that the single mode of financing and lack of financing channels. Comparedwith large enterprises, small and medium-sized enterprises have the characteristics ofsmall scale of enterprise, more market risk, and income uncertainty and less mortgageassets, making it difficult to obtain bank financing. In October2009, The establishmentof GEM (growth enterprise market) of our country to a certain extent solved thisproblem, the opening of the GEM makes many companies which can’t reach therequirements before especially some high-tech, high-growth, high added value for thecharacteristics of small and medium-sized enterprises, won more and better financingchannels and development conditions than ever before.In recent years, however, the gem-listed companies generally doing earningsmanagement for the financial situation of the enterprises around the IPO, so as tooverestimate the enterprise profit ability, improve the stock price, which makes theperformance of these enterprises generally decline after IPO. According to the gemissue management measures of our country, one of the core standards of the gem-listedcompanies are growth instead of profit, which requires continuous growth in profits orincome. The listed standard growth in the lowest profitability and performance will beinduced to listing Corporation reporting higher earnings to achieve the performance of"continuous growth". So the listed companies in order to be able to get in the gemmarket, and in a price to raise money, realize the marketization of shareholder wealth,the gem-listed companies have motivation to improve the growth as the goal ofearnings management, in order to achieve the purpose of the performance of continuousgrowth around IPO.Earnings management as a kind of legal behavior is common in business activity,but it harms the interests of many enterprise stakeholders, and its harmfulness is no lessthan accounting fraud, so it causes a high attention of many people. Earningsmanagement may cause the gem companies’ accounting information distortion, addingto the company’s management and the information asymmetry between regulators,investors, regulators and outside investors to the company value judgment wasmisguided, this will be conducive to the growth enterprise market and the long-termhealthy development of small and medium-sized enterprises. Gem is designed for the high growth of small and medium-sized enterprise development to provide moreconvenient and effective financing platform, which is benefit to our country’s small andmedium-sized enterprises and the development of high-tech industry, so the healthy andorderly development of growth enterprise market has very important function andmeaning of our country economy. But how to accurate find it in our country’s gemexistence of earnings management behavior of listed companies, or whether suchearnings management behavior serious impact and hinder the growth enterprise marketresource effective configuration and health of our country, it need us to use morescientific method for empirical research to verify. Therefore, this article will select thegem-listed companies as the research samples to research the behavior of earningsmanagement in initial public offerings, and will use the empirical method to verify.The paper firstly describes the gem IPO earnings management researchbackground and significance, and research methods, the framework of this research andinnovation. Then the next chapter discusses the basic concepts and features of IPOearnings management, and then introduced domestic and foreign about the earningsmanagement of IPO research status. The third chapter introduces and analyzes China’sIPO earnings management motivation from the multiple perspectives. The fourthchapter firstly proposes for IPO earnings management research hypothesis, on the basisof the models introduced in the last chapter we choice modified Jones model, andselects the355listed companies in GEM as the research sample, and also has carried onthe detailed descriptive statistics to sample, in order to give readers know gemcompanies of industry in our country, region, and so on a better understanding. Meanwhile, according to the hypothesis to analysis the phenomenon and the process ofearnings management around IPO. And the fifth section summarizes IPO earningsmanagement empirical research conclusions, and then gives some policy Suggestions toput forward the management of gem IPO earnings management of listed company. Bymaking a brief summary of this article research results and deficiencies and putsforward Suggestions for the future further research and outlook.