Essays in venture capital, corporate governance and earnings management.

摘要

The first essay in this dissertation examines the role of the venture capitalist in the corporate governance of the firm following the IPO. I conduct three independent sets of tests examining effectively how governance and monitoring might differ for venture- and non-venture-backed firms. First, I find that venture-backed firms have lower earnings management in the IPO year, as measured by the level of their discretionary accounting accruals, than similar non-venture-backed firms. Second, venture-backed firms experience a significantly higher wealth effect upon the announcement of the adoption of a shareholder rights agreement (poison pill) than non-venture-backed firms, consistent with the hypothesis that venture-backed firms are more likely than non-venture-backed firms to use these agreements for the purpose of shareholder wealth maximization. Finally, venture-backed firms have boards of directors, audit committees and compensation committees that are more independent from management than those of similar non-venture backed firms, and are more likely to separate the roles of CEO and chairman. I also provide evidence that suggests that these effects are not common to all pre-IPO large shareholders.; The second essay in this dissertation demonstrates that there is considerable information about the informativeness, or “quality,” of corporate earnings contained within the time-series dynamics of traditional measures of earnings management. We find empirical evidence that both accruals and discretionary accruals exhibit negative serial autocorrelation. On the basis of this analysis, we hypothesize that the longer a firm exhibits abnormally high measures of earnings management, the less informative that firm's reported earnings will be. Insider trading patterns and the patterns of ex-post firm equity returns confirm this hypothesis. Moreover, the results suggest that single periods of aggressive earnings management may be incorporating new, positive information, previously unknown to the market, that will be reflected in future cash flows.