An International Meeting of the American Accounting Association American Accounting Association 2006 Annual Meeting August 6–9, 2006 Washington, D.C.

Wei Luo
Peking University

Abstract: I investigate whether earnings management in IPO firms has any consequence on reputation of venture capitalists. I document that discretionary accruals in the IPO year are negatively related to the number of new IPOs backed by same lead VCs during the lockup period, new IPOs during the first year after the lockup period, and new IPOs during the second year after the lockup period. In addition, I find that underpricing for the new IPOs backed by same lead VC in the first year after the expiration of lockup period is greater if there is income-increasing earnings management in the IPO year. Overall, I find some evidence that earnings management imposes costs on lead venture capitalists.

Back to Session Listing

AAA Home Page