An Empirical Research Of Relationship Between Earnings Management And Debt Financing

The development of facilities can’t actualize without debt capital. And the scale of debt financing and the difficulty to get the debt financing are always determined by the profitability. When the enterprises cannot reach the financing conditions, they usually use earnings management to manipulate the earnings information so that they can achieve the purpose of debt financing. So debt financing may cause the earnings management. However, the earnings management of enterprise management will be subject to the debt financing from the perspective of agency conflicts. So we can come to the conclusion that there is a definite link between earnings management and debt financing.This paper combines theoretical analysis with empirical analysis. In the theoretical analysis, this paper analyzes how the earnings management affects the formulation of debt financing by distinguishing the recognizing ability of the creditors for different debtor. Through distinguishing four different situations,this paper analyzes how the debt financing behavior influences the earnings management. In the empirical analysis, this paper uses descriptive statistics, correlation analysis to analyze the data basically. And this paper uses multiple regression analysis to empirically verify the hypotheses.This paper draws the following conclusions:Firstly, the long-term debt maturity enterprises usually do more earnings management and the more earnings managem--ent enterprises do, the greater proportion of long-term liabilities is. Secondly, the larger of the financing scale companies get, the more earnings management it may do, but the relevance is not notable; the more earnings management enterprises do, the larger of the financing scale it may get. Thirdly, the more earnings management enterprises do, the lower financing cost enterprises may pay; the higher financing cost the enterprises pay, the more earnings management enterprises do. The results of practical test further prove that the creditors in our country, which is mainly consisted of banks, cannot recognize the earnings management, especially the real earnings management. What’s more, the follow-up supervision for the debtors is not enough.