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Venture capital and earnings management in IPOs

Author

Listed:
  • Sabrina P. Ozawa Gioielli

    (Getulio Vargas Foundation)

  • Antonio Gledson de Carvalho

    (Getulio Vargas Foundation)

  • Joelson Oliveira Sampaio

    (Getulio Vargas Foundation)

Abstract

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.

Suggested Citation

  • Sabrina P. Ozawa Gioielli & Antonio Gledson de Carvalho & Joelson Oliveira Sampaio, 2013. "Venture capital and earnings management in IPOs," Brazilian Business Review, Fucape Business School, vol. 10(4), pages 30-64, October.
    • Handle: RePEc:bbz:fcpbbr:v:10:y:2013:i:4:p:30-64
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    References listed on IDEAS

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    Cited by:

    1. Matheus da Costa Gomes & João Paulo Augusto Eça & Marcelo Botelho da Costa Moraes & Maurício Ribeiro do Valle, 2021. "The Relationship between Earnings Management and Equity Market Timing," RAC - Revista de Administração Contemporânea (Journal of Contemporary Administration), ANPAD - Associação Nacional de Pós-Graduação e Pesquisa em Administração, vol. 25(6), pages 200289-2002.

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