The Implementation Of ERP、Earnings Management And Debt Cost

Over the past three decades of reform and opening-up, debt financing has played an increasingly important role in China’s social financing. Especially in terms of private debt, companies in China have always relied heavily on the bank loans. As debt financing acquirement, debt pricing, bonds credit rating and debt contract signing etc. would all have to rely on the earnings reported by the company, company’s debt financing are necessarily connected to earnings management. So as an important part of China’s capital market, we should pay high attention to the relationship between debt financing and earnings management. At present, the opinions about the relationship between debt financing and earnings management are different by practitioners and theorists and there are two main opinions, one is that creditors can identify the earnings management of companies; the other is that creditors can not identify the earnings management of companies.ERP is the system incorporating the function of manufacturing, sales, purchasing, cost, finance, service. It can transfer data timely and build a more open and transparent business environment for internal and external decision makers. While compared with the generally listed companies, whether the earnings management of the companies that have implemented ERP systems can be identified by creditors? Current academic research on such questions is relatively rare, so discussion on these issues will have important theoretical and practical meanings.Focusing on the relationship between debt financing and earnings management, this paper studies how managers’earnings management behavior of the companies in our country affects the cost of debt financing and how managers’earnings management behavior of the companies that have implemented ERP systems affects the cost of debt financing. This paper argues that the implementation of the ERP systems will make more and more information related to business operations more transparent to outside investors and managers. And there is no doubt that the probability of earnings management to be identified will increase in a transparent information environment. Once the company’s earnings management is identified, the earnings of the company will be restored by outside investors and eliminate the impact of earnings management on report earnings, so they make decisions not just basing on the report earnings. Creditors represented by banks may punish the companies with earnings management by high financing costs. Then this paper proposes the hypothesis "creditors represented by banks can identify the managers’ earnings management behavior of the companies that have implemented ERP systems, the relationship between debt financing and earnings management of the companies that have implemented ERP systems is significantly positive". Through empirical testing, we draw the conclusion and verify the hypothesis that the relationship between debt financing and earnings management of the companies that have implemented ERP systems is significantly positive. The higher the degree of earnings management is, the higher the cost of debt financing is.