TITLE:
The Research on Venture Capital’s Effect on Earnings Management of Listed Companies of GEM before IPO: Evidence from China
AUTHORS:
Ruting Feng
KEYWORDS:
China GEM, Accrual Earnings Management, Venture Capital
JOURNAL NAME:
Modern Economy,
Vol.6 No.5,
May
26,
2015
ABSTRACT: This article selects IPO firms of China GEM in 2009-2014 as the research
object, using cross sectional modified Jones model to measure accrued earnings
management, with the multiple regression method to discuss the effect of venture
capital (VC) on earnings management before IPO. It shows that there is negative
correlation between single VC and the earnings management before IPO, but no
significant correlation between joint VC and the earnings management before
IPO. This result is robust. In conclusion, single VC plays the role of
certification and monitoring. While because of the incompleteness of the
contracts, there are conflicts in the joint VC. It prevents joint VC from
inhibiting the action of the earnings management.