VC's Heterogeneity And Earnings Management Pre-IPO

With the appearance of SEM and GEM,venture capital has become increasingly active in the capital markets of our country.More and more venture capital institutions are keen on investing in high-tech start-ups,which not only provide a new financing channel but enables venture capital institutions exit smoothly through IPO so as to realize the purpose of investment.At the same time,venture capitals are positive to participate in corporate governance by the ways of holding shares of corporate and holding a certain number of seats in the board of directors and management of the enterprise.So in IPO process of enterprises,what role do venture capital institutions play as a professional institutional investors ? How do they affect IPO companies by participating in corporate governance? This is the issue that this article needs to explore.There has been some references explore the impact of different background VC institutions on the IPO underpricing,IPO long-term performance,market performance and so on based on the heterogeneity of venture capital background.But there are little research about VC's heterogeneity and IPO earnings management.In addition,the different motivations for investment in different background VCs and the differences in their participation in corporate governance may lead to differences in the impact on earnings management of before IPO.Therefore,this paper attempts to examine impacts of VC's participation in corporate governance and its background heterogeneity on earnings management pre-IPO on the basis of �different background of VC institutions-different investment motives � the different degree of participation in corporate governance � the different earnings management behavior "This paper examines the relationship between the heterogeneity of VC �s background and participating in corporate governance and earnings management pre-IPO based on the empirical data of 254 SME IPO companies from 2008 to 2016.The main findings of this paper are as follows: Firstly,the VC's heterogeneity of background has obvious different impacts on earnings management pre-IPO.VCs backed by government are useful to inhibit earnings management pe-IPO.VCs backed by individuals will aggravate the earnings management behavior pre-IPO.VCs backed by enterprises have no significant effect on earnings management pre-IPO.Secondly,VC institutions participate in corporate governance will inhibit earnings management behavior pre-IPO.The shareholding of VC and the proportionof directors dispatched to the company have no significant effect on earnings management pre-IPO,but the proportion of the professional directors has a significant negative correlation with earnings management pre-IPO.Thirdly,furthur combine with VC's background to research,which finds that the participation in corporate governceof VCs backed by government are beneficial to inhibit earnings management pre-IPO,the effect of VC's backed by individuals is completely oppsite,but there is no obvious impact between the participation in governance of VC's backed by enterprises and earnings management pre-IPO.The research in this paper shows that although venture capital has become an external governance mechanism in general,its governance abilities and effects are constrained and influenced by different institutional environments.The conclusions of the study provide empirical evidence for further improving the VC environment.