Earnings management at the time of the IPO is an important issue and has captured considerable attention of academic literatures. However, there have been few studies testing earnings management in the context of market condition, and when financial intermediaries such as venture capital (VC) involve in the IPO process. This study investigates how VCs influence on earnings management of IPOs upon market condition. We find evidence that if IPO firms go public in the bear market periods, VCs are more likely to inflate their earnings more aggressively at the IPO, compared to the bull market periods. Specifically, while most of studies have argued that VCs have certification effect and monitoring effect to discourage earnings management, we argue that, with empirical finding in Korea, VCs have incentives to inflate their IPOs’ earnings for harvesting high returns in the IPO year and the inflated earnings are more deepened in bear market periods.