Accrual And Real Earnings Management Pre And Post IPO Of The VC-backed Companies

With the rapid development of venture capital in China,more and more companies in the start-up period or growth period have got the support from VC in capital and management technology and other aspects.VC can provide long-term equity capital and value-added services to financiers while taking higher risks.But VC will sell the stock to obtain high return through IPO,mergers and acquisitions or other way in the future.So VC may affect the business plan or financial decision pre and post IPO of the companies and may led to earnings management issues.In recent years,with the continuous improvement of the China's corporate accounting standards and regulatory mechanisms,the companies are getting harder and harder to use accrual earnings management and gradually tend to use real earnings management.This paper mainly investigates the characteristic of earnings management and the primary choice of two types of earnings management at different stages pre and post IPO of the VC-backed companies from 2002 to 2014,based on accrual earnings management and real earnings management.The empirical conclusions are as follows,(1)The VC-backed companies present more accrual and real earnings management than non VC-backed companies in the year before IPO and the main purpose is to promote the IPO.The VC-backed companies will make full use of accrual earnings management and real earnings management to manipulate profits,not only focus on the use of one of the earnings management.(2)The VC-backed companies present more real earnings management than non VC-backed companies in the year of IPO and the main purpose is to create favorable conditions for the withdrawal through selling shares.(3)The VC-backed companies don't present more accrual or real earnings management than non VC-backed companies in the yaer after IPO.The VC-backed companies are relatively less likely to choose accrual earnings management or real earnings management.The main contribution of the paper is that this paper attempts to use the standard deviation to standardize the accrual earnings manipulated variable and the real earnings manipulated variable and determine the virtual variable of primary choice of two types of earnings management by comparing the standardized value.Then uses a linear prability model to further explore the primary choice of two types of earnings management at different stages pre and post IPO of the VC-backed companies.