An Empirical Study On IPO,Earnings Management And Company Performance

China Securities Regulatory Commission announced Interim Measures on Administration of Initial Public Offering and Listing on Growth Enterprise Board on March 31 st,2009.In October the same year,Growth Enterprise Market(GEM)officially listed in China's Shenzhen Stock Exchange.The establishment of the GEM not only is of great significance to the perfection of China's capital market,but also promote the development of small and medium enterprises in our country and becomes the main platform for raising funds for independent innovation capability and fast-growing enterprises.Therefore,it is very important and necessary to study GEM.Initial public offering(IPO)is the first time that a company will sell shares to the public and an important channel for GEM enterprises to raise funds.Companies can get lots of capital investment by IPO,so it is very important for GEM companies' long-term development.According to data,from the opening to December 31 th,2016,the number of listed companies on the GEM has reached 577,there is an increase of over 13 times compared to the beginning of the establishment.It shows that the companies' demand that raising funds by IPO is increasing year by year.Relevant measures announced by CSRC(China Securities Regulatory Commission)reveal that small and medium enterprises are relatively easier to enter the GEM instead of motherboard market.The main reasons are that most small and medium enterprises' history is too short,their extent is too small and profitability is too low.Few SMEs can meet the requirements.In order to make the issue of shares successfully,the proposed IPO companies have strong desire to conduct real earnings management.After the listing,in order to increase share price constantly and expand the scale of financing,the companies would tend to conduct positive earnings management.This dissertation aims to argue the effects of possible factors on earnings management after IPO.This dissertation selects the 326 companies which set up IPO on GEM from the opening to 2012 as samples,observe their conditions during that year and next two years after IPO.Firstly,using the t-test method to compare the averages of accrued earnings management and real earnings management by year by year and verify the difference between earnings management data and zero.Secondly,based on the timeline of the initial public offering,constructing the profitability and development capability of the GEM enterprises into two sets of sample data and then comparing their averages by the t-test.Finally,this dissertation take accrued earnings management and real earnings management as independent variables and ROA,net profit margin on sales,total assets growth rate and profit growth as dependent variables to verify the impact of earnings management on company performance.The research results show that these indicators of business conditions have downward trends after the IPO.Various companies conduct accruals and real earnings management before and after listing,these two ways play different roles in company performance.The accrued earnings management have a positive effect on company performance,while real earnings management has a negative effect on company performance.In most of time,the absolute value of the true earnings management is greater than the absolute value of the accrual earnings management,which shows that the negative effect of the real earnings management to the company performance is greater than the positive effect brought by the accrual earnings management to the company performance.In the end,some suggestions are given at the end of this paper.Firstly,securities regulatory authorities should strengthen the review of the financial data of the proposed IPO companies and the control of companies' raising funds behavior.In addition,companies on GEM should obey relevant regulation and improve the quality of internal accounting information disclosure.Finally,GEM investors should gain the ability to identify false financial information and analysis comprehensively before make rational investment decisions.These measures can decrease bad motivation of the IPO,restrain earnings management behavior after IPO,and make our country's GEM market develop more normatively.