An Empirical Study On The Degree Of Earnings Management Of The Gem IPO

Since the gem launched in China in 2009, it was attracting much attention of the capital market and many investors. The gem is not only conductive to developing the multilevel capital market system,but also good for the medium-sized and small enterprises to finance from the capital market. However, it develops for a short time, it has little experience. There is several study about the earnings management of the companies who list in the gem. This paper is just the empirical analysis about this issue. Until now, scholars study the motherboard market and they find that the listing corporations have earnings management during IPO. The earnings management reports false accounting information, it causes losses for the investors. At the same time, earnings management behavior affects the entire capital market economic order, it is bad for the healthy development of the capital market.Against such a backdrop, this paper mainly researches on earnings management behavior of the listing corporation in Gem. First of all, this paper summaries the previous concepts of the earnings management and puts forward the new concept of the earnings management. Then this paper analyzes the motivation,operating methods of the earnings management, and introduces how to identify the earnings management behavior during the process of IPO. This part provides some theory for the empirical part. In the part of empirical study, this paper chooses 245 companies which listed in 2010 and 2011 in Gem as the research objects. Then this paper analyzes the performance of these companies, uses the Jones-CFO model to analyze the companies earnings management behavior. Because of the limitation of Jones-CFO model, this paper puts forward a new model which is based on the sales profit ratio. The new model is more suitable for the second board market. This paper puts forward three hypotheses, and all of them are proved by empirical study. At last, this paper gives some corresponding measures and suggestions to help identify or supervise of the enterprises in the Gem in view of the different subjects.Due to the launch of Gem is too short to find all the data the paper needed, the sample is just selected the companies listed in 2010 and 2011, then the entire data can be found one year before IPO and one year after IPO. The lack of data causes limitation of empirical results. In addition, the limitation of my personal ability the writing of time make the paper remains expanding space.