TITLE:
The Empirical Study on the Relationship of IPO Lockup, Earnings Management and Venture Capital
AUTHORS:
Lan Zhou
KEYWORDS:
Earnings Management, IPO Lockup, Venture Capitalists, Signal Theory
JOURNAL NAME:
Modern Economy,
Vol.8 No.9,
August
30,
2017
ABSTRACT: Earnings management occurs when management’s autonomy allows managers
to change the surpluses and then mislead investors about potential company’s performance and quality.
According to the sample of 330 listed companies on the GEM, we use the event
study and modified Jones model to measure variables and then find that the
market investors can guard against the earnings management behavior by
observing the abnormal reverse volatility of the IPO stock lifting period,
which can be looked as a negative signal. In addition, the study also finds
that the IPO firms supported by venture capital institutions have stronger
earnings management at the lockup expiration period. Moreover, the state-owned
background and high reputation of venture capital institutions has negative
regulation function, which can supervise and audit the earnings management
behavior of enterprises after IPO, thus weakening the negative volatility of
the market. From the point of view of signal theory, this paper probes into the
negative signals of earnings management behavior of IPO during the lockup
expiration period, and has a better understanding of the transfer of negative
signals.