| Under the accrual accounting system, accounting earnings include accrued profit and operating cash flow. So the way of earnings management contains accrued items of earnings management and the surplus of real activity management, which is called real earnings management. Managers usually take real earnings management to achieve the anticipated goal by constructing real trading activities or controlling the occurrence of trading point. The specific measures are mainly about controlling cash flow, cost, expensive or stock repurchases and so on. Current academic research on earnings management is focused on accrued earnings management, and the study of real earnings management is relatively rare.The United States enacted stricter Sarbanes-Oxley act after Enron scandal. However the act had effects on accrual earnings management and real earnings management, making the means of company’s earnings management turn into real earnings management, which more subtle and more difficult to measure. And February2006China’s Ministry of Finance issued new accounting standards which is more scientific and practical. The implementation of new guidelines is an important step on the way to converge with international standards. Besides it took measures to prevent and limit in the place where earnings management is widely applied, which can make the behavior of company’s earnings management have a change. So theoretically, the implementation of new accounting standards is bound to have a significant impact on the way and frequency of earnings management. At the same time, in that, real earnings management and accrued earnings management are complementary. Along with more and more strong regulation, all these can expand the use space of real earnings management to some extent.As means of earnings management, accrued earnings management and real earnings management can exaggerate or reduce real surplus level of a company in some degree. Especially the real earnings management, which not only influence the company current report profits and current cash flow, but also will make the company deviate from the normal direction of its operating activities and detract from the value of the company’s future. However bank creditors and other creditors usually make decisions according to the surplus information and other relevant accounting information disclosed by company. So if the banks don’t separate and identify the accounting information, it will lead to produce large amounts of bad loans and is not conducive to the stability of the financial system. So in our country, whether banks identify the earnings management of companies? And predecessors’studies have found that the bank can identify the company’s accrual earnings management on the whole. But there is no answer about real earnings management. Therefore, it is necessary to study the following questions: Whether banks can identify the company’s real earnings management behavior in the process of credit-check? Can they recognize some or none of the real earnings management activities? Also there is a huge difference about our country’s financial ecological environment. And the related literature research (Deng Jianping et al.,2011; Guan Kaolei,2010; Xie Deren et al.,2007) suggests that good financial ecological environment is also help Banks to make the right credit decisions. SO we also want to know whether a good financial ecological environment can help Banks to identify the company’s real earnings management activities. On the whole, this paper mainly studied two problems. First, whether creditors represented by banks can identify real earnings management activities of companies, or whether can identify some of the real earnings management activities; Second, whether the differences on the financial ecological environment affect the recognition results of real earnings management from creditors represented by bank.In this paper, the research idea is as follows:firstly it combs the research result of real earnings management, the cost of debt, the relation between real earnings management and the cost of debt from the literature of domestic and foreign. So that I can master the research situation well about this field and provide necessary theoretical basis and reference for the hypothesis. This chapter consists of three aspects content:firstly, the literature is about real earnings management, including the definition of real earnings management, the existence of real earnings management, the means of real earnings management, the real motivation and economic consequences of earnings management research and investors’ reaction to the real earnings management; Second is about debt costs literature, including the definition of debt costs, influence factors and other related research results; Three is about related literature of the relation between earnings management and companies’debt costs. By combing above all the literature I get the research ideas of this article.Then it’s about the theoretical analysis and research hypothesis. This part mainly analysis the relations among the bank loans, the credit risk and loan interest rates. On the basis of above that, the paper analysis the characteristics of real earnings management way and the development of banking credit audit in our country for further and gets the research hypothesis. After that I choose the suitable sample according to the characteristics of capital market in China. About sample I make the descriptive statistics analysis and multiple linear regression analysis to test the relation between real earnings management and companies’ debt cost. At last combining the theoretical analysis and empirical analysis, I give this research conclusion, provide enlightenment and suggestions and point out the shortage and further research direction of this paper. The first chapter is introduction. This part introduces the research backgroundand significance of this article, the research question, content and methods, research ideas and the structure and the innovation.The second chapter is literature review. It combs the research result of real earnings management, the cost of debt, the relation between real earnings management and the cost of debt from the literature of domestic and foreign. The literature about real earnings management includes the definition of real earnings management, the existence of real earnings management, the means of real earnings management, the real motivation and economic consequences of earnings management research and investors’reaction to the real earnings management; Second is about debt costs literature and third is about related literature of the relation between earnings management and companies’ debt costs. Those literatures lay the theoretical foundation of study in this paper.The third chapter is about theoretical analysis and the research hypothesis. This part mainly analysis the relations among the bank loans, the credit risk and loan interest rates. On the basis of above that, the paper analysis the characteristics of real earnings management way and the development of banking credit audit in our country for further and gets the research hypothesis.The fourth chapter is about the empirical research design. It mainly includes sample selection, data sources, definition and measurement of relevant variables as well as the frame of the research model.The fifth chapter is about the empirical test. This part puts the sample data into the research model to test and analysis. The tests mainly involve four models. One is about the relation between real earnings management and cost of debt, the three are about the relation between individual indicators of real earnings management and the company’s cost of debt. In addition on the basis of the above four models the paper analyses the relation between the two variables according to the differences of our country’s financial ecological environment. In order to guarantee the robustness of conclusions, this paper has made a robustness test, mainly by changing the variables and empirical methods.The sixth chapter is about the research conclusions, revelation and advice, research deficiencies and further outlook. According to the above theoretical analysis and empirical results, the paper explains the research conclusion and analyzes the reflection. Also we give the deficiencies and make a further prospect.After theoretical analyses and empirical tests, the research conclusions of the paper are as follows:Real earnings management is existence in the companies of China. The managers usually use the three main means, cash flow manipulation, manipulation and expensive manipulation, to make real earnings management, which the first two methods are widely used.Empirical research results of this paper find that the relationship between the extent of real earnings management, which is under the control of cash flow, production cost and the above comprehensive method, and companies’debt cost in our country is significantly negative. The more higher the degree of companies’ real earnings management is, the less lower the cost of debt is. And under the expensive control method the correlation between real earnings management and the cost of debt is not significant. It suggests that banks and other creditors don’t give enough attention to companies’ real earnings management activities, especially under the control of cash flow and production cost. The above two kinds of real earnings management are not recognized and also help the company get the lower rates loan, which increase Banks’ credit risk. This also explains why companies use the means of cash flow manipulation and production cost control to carry out real earnings management activities frequently. So in the future creditors represented by Banks should pay more attention to companies’real earnings management under control of cash flow and production cost, in order to prevent the company getting bank loans by real earnings management, affect the safety of the loans and threaten the stability of the financial system.Considering the financial ecological environment in China is very different, this paper makes a further examine about the relationship between real earnings management and the cost of debt combining with our country special financial ecological environment. Studies find that even in a fine financial ecological environment, real earnings management of companies and debt costs did not show a significant positive correlation. It suggests that even in the fine financial ecological environment region, the banks didn’t also pay attention to the real earnings management.The banks still are unable to identify the real earnings management activities on the whole. At the same time it also suggests that there are still some problems during the construction of financial ecological environment. So we continue to improve and optimize the financial ecological environment.In general, because of the hidden means of real earnings management the banks couldn’t identify companies’real earnings management activities. While the existing studies have shown that real earnings management, which is through the manipulation of the real deal to achieve the expected financial target, will lead to deviate from the normal activities and the company’s future value will have a decline (Lian Yujun, Li Zengfu,2012). So it gets important to avoid companies’ real earnings management activities. The research conclusion of this article told that in identification and supervision of the company’s real earnings management activities, the banks were still in the absence of state. In the credit-check process banks should pay more attention to and wary of companies’real earnings management activities. Besides banks can make a punishment to those companies who have a higher real earnings management level, to ensure the safety of bank credit assets. The contribution of this paper is as flowers. first, this paper enriches the research of real earnings management. It also provides some guidance and reference for later research. Because the current domestic research mostly focused on accrual earnings management and ignored the real earnings management. Secondly, in this paper, it considers the differences about financial ecological environment in our country when it tests the relationship between real earnings management and cost debt of listed companies, which makes the paper practical and significant. At the same time, about the research methods, the paper studies the above problem from these four aspects which is the cash flow control, production cost control, expensive control, and the comprehensive control ways of above three. At last, the paper also finds that managers prefer to use cash flow manipulation and production cost control to make real earnings management. And the relationship between real earnings management activities under the two kinds of control methods and the cost of debt is significant negative. Banks and other creditors not only failed to identify the two types of real earnings management, but the higher real earnings management degree is, the lower the cost of the company’s debt is. It also points that banks should focus on companies’ real earnings management under control of cash flow and production cost in the credit-check. And they should check strictly to ensure the safety of credit assets credit and stabilize the financial system.The limitations of this paper are as follows. The model to measure the degree of real earnings management is from foreign research model, and whether this research model can accurately measure the degree reality of real earnings management, and whether the model is applicable in China’s capital markets research, these problems are worth to further discuss. In addition, in this paper, the study of real earnings management is based on the research of all the industry as a whole and don’t analyze the characteristics of real earnings management in different industry. So whether does the recognition of real earnings management have difference? These above are to be further in-depth study in the future. |
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