Research On VC Investment And The Earnings Management Of Companies File For IPO On GEM

It has been 8 years since Shenzhen Stock Exchange established the Growth Enterprise Market(GEM)in 2009.On one hand the GEM has become an important financing platform for many start-up high-tech companies;on the other hand,driven by the profit-seeking nature,many VC institutions choose to help the companies that they invest in enlist on GEM to secure interest.The report chooses 216 start-up companies that went IPO on GEM during 2014 to 2016 as samples,screens the companies with VC background and summarizes the investment structure of the VC investment.Using the modified Jones Model as the calculation model for company earnings and descriptive statistics and multiple regression analysis as research method,the report analyses the relation between earnings management conditions of the 216 companies that went IPO on GEM of Shenzhen Stock Exchange from 2014 to 2016 and the involvement of VC.Results generated based on the sample companies demonstrate that most of the companies went public on GEM of Shenzhen Stock Exchange in the past three years have implemented IPO earnings management.If set the companies without VC background as the control group,then the companies with VC background have a relatively low level of IPO earnings management during their listing period.As the share held by VC rises,the level of earnings management in the public companies goes down.When the VC institution is famous in China,the level of earnings management of the companies it invested in will be lessened accordingly.If one sample company receives investment from more than one VC institutions at the same time,the level of earnings management of the company is in negative correlation with the complexity of the investment structure of the VC institutions.