Research On The Impact Of Venture Capital On Earnings Management Before IPO Of GEM Companies

On October 30,2009,China's GEM was officially launched.GEM,also known as the second board market,is a concept corresponding to the main board.Most of the companies on the ChiNext are small and medium-sized high-tech enterprises.Their main role is to provide a good financing platform for emerging companies that have not yet reached the requirements of the main board,so as to promote the development and progress of high-tech industries.The emergence of the GEM has provided a good exit channel for China's venture capital institutions and prompted China's venture capital industry.In order to gain quick returns,venture capital institutions prefer to invest in small and medium-sized enterprises,to obtain high profits by helping them to list on the GEM,and exit after the lock-in period ends,so as to realize the appreciation of venture capital.At the same time,due to the high threshold for the listing of the GEM in China and the strict supervision of the securities market,many companies generally have earnings management behaviors in order to be able to list on the GEM and obtain higher issuance prices.In the process of helping companies to list on the GEM,will venture capital institutions bring positive regulatory oversight to companies to reduce their earnings management levels,or will they bring negative effects to enterprises and increase their earnings management levels?The research take the company listed on the Chinese GEM market from 2010 to 2016 as sample,and sorted out the company's basic financial data,the corresponding risk investment background and institutional characteristics.The expanded Jones model was used to measure the level of earnings management in the previous year of IPO companies listed on the GEM.At the same time,we used the multiple linear regression model to study the impact of venture capital and its institutional characteristics(shareholding percentage and shareholding time)on earnings management.The results showed that most companies have earnings management behavior in the previous year of IPO companies listed on the GEM.The participation of venture capital institutions could reduce the company's earnings management.The proportion of shareholding of venture capital institutions is inversely proportional to the level of earnings management.Inverse relationship was presented in the risk investment institutions' shareholding time and earnings management levels as well.