Download or read book Earnings Management and Reputation of Venture Capitalists written by Wei Luo and published by . This book was released on 2006 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt: I investigate whether earnings management in venture-capital-backed 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 the same lead venture capitalist during the lockup period, the number of new IPOs during the first year after the lockup period, and the number of new IPOs during the second year after the lockup period. In addition, I find that if there is income-increasing earnings management in the IPO year, underpricing is greater for the new IPOs backed by the same lead venture capitalist in the first year after the expiration of lockup period. But there is no significantly positive relationship between the discretionary accruals in the IPO year and the underpricing of new IPOs backed by the same lead venture capitalist in the second year after the expiration of lockup period. Overall, I find some evidence that earnings management imposes costs on lead venture capitalists.