Research On The Earnings Management Of The Investment Enterprises When The Venture Capital Exits The Listed Companies

The launches of the GEM bring great opportunity to the venture capital. Now venture capital has become an important participant in the capital markets. Venture capital normally gain benefit primarily through liquidation or sale of equity investment income. Among all kinds of ways to exit, IPO is the best way that can obtain higher capital gains.Then after IPO, particularly in the reduction stage, if the venture capital still have great impact to earnings management behavior of the listed companies. In mainland China, the relevant literature is rare. At present, the research about the venture capital to the listed companies earnings management behavior focus on the year before IPO and the year of IPO. The reason is that the CSRC require the IPO companies must disclose accounting information of the preceding three years of IPO and the recent issue of IPO. In order to achieve a higher IPO price, the venture capital has a strong motivation to manipulate earnings level of the year before IPO and the IPO year.Different from other large shareholders, venture capital have limited lifespan, the reduction after the lock-up period is inevitable. The Reduction period is the key point which decide whether venture capital can gain benefit from the invest. So in the reduction process, whether venture capitalists tend to exhibit opportunistic moral hazard, or to maintain good professional investment spirit, whether the venture capital may influence the earnings management behavior to obtain a higher capital gains. This is the focus in research.In this paper, we select the companies that listed on GEM during October 31,2009 to December 31,2014 and lock-up period cut-off before 31 December 2015 as our samples to study during the reduction stage what effect venture capitals can exert to the IPO companies. The results show that during the reduction phase, the venture capital show great opportunistic tendencies. In order to gain greater benefits, the venture capital raises the price of share price by affecting the management behavior of earnings. And the higher of shareholding ratio, the stronger of the level of management behavior of earnings. Furthermore, when we divide the venture capital into state-owned non-state, we find that state-owned venture capital have greater impact to the management behavior of earnings of the invested companies.