Venture capital and earnings management in IPOs

• Autor(a) principal: Gioielli, Sabrina P. Ozawa
• Data de Publicação: 2013
• Outros Autores: Carvalho, Antonio Gledson de, Sampaio, Joelson Oliveira
• Tipo de documento: Artigo
• Idioma: eng; por
• Título da fonte: BBR. Brazilian Business Review (English edition. Online)
• Texto Completo: http://www.bbronline.com.br/index.php/bbr/article/view/185
• topic: Earnings management; IPO; venture capital; Gerenciamento de resultados; oferta pública inicial de ações (IPO); capital de risco (ou private equity e venture capital – PE/VC)

We investigate earnings management (EM) in IPOs and the role of private equity/venture capital (PEVC) in hampering such practice. We show that when analyzing EM, PEVC and non-PEVC-sponsored firms should be treated as different samples: if one splits the sample, R-squared increases drastically for both subsamples. For PEVC-sponsored IPOs EM is marginal, mostly related to firms’ characteristics and little related to the phases of the IPOs. Differently, for non-PEVC-sponsored IPOs EM is significant, mostly related to the phases of the IPO and little related to firms’ characteristics. Finally, the reputation of the auditor is important only for PEVC-sponsored IPOs, suggesting that the choice of auditor is more meaningful for PEVC-sponsored firm, i.e, the choice of reputed auditor represents a compromise not to manage earnings.