The Impact Of Accrual Earnings Management And Real Earnings Management On Enterprises’ Capital Cost

According to the modern economic theory, the nature of the company is to replace the price-and-market mechanism. In the company, accounting information can be substitute for the market price and the accounting information which mainly reflects the Enterprise operating performance and guides the optimal allocation of resources. In Chinese current system of financial reporting, the earnings information becomes one of the important indicators of shareholders, creditors and other stakeholders using to measure the enterprise management status and evaluate the enterprise value, because of its adequate information content. Because Accounting Standards for Business Enterprises in our country are based on the accrual basis, the occurrence of economic business and currency of payment is not completely consistent, that is to say, there exists a separation of cash flow and economic activity, most accountants have objective and subjective uncertainty of reflection and control of the economic activities. This brings about wide room of the earnings management behavior of listed companies. The enterprise’s financial activities is on the premise of raising money which is important to the enterprise survival and development, and enterprise can neither survive nor develop without the fund’s raising. The cost of capital in financial decision plays an important role, especially for the improvement of capital market resource allocation efficiency and capital flow to correctly guide. It is the basis of choosing the financing plan, measuring the degree of enterprise capital structure optimization, evaluating the feasibility of the investment project and evaluating the enterprise overall performance. Surplus information in the capital market can provide basis of decision-making for the investors’capital allocation. But the problem about the authenticity reliability and integrity of surplus information disclosure is not optimistic, because of the phenomenon of accounting information’s distortion in the capital market. In our country, capital market is not mature and perfect, and stock price index is sensitive to surplus, so it is helpful for investors to make correct investment decisions, standardizing the listed company information disclosure system, improving the effectiveness of the security’s market in our country to study the role of capital market.This paper selects Chinese A-share listed company data from Shenzhen and Shanghai in the year of 2007-2011 as the study sample, and checkouts whether and how the accrual and real earnings management behavior affects the company’s cost of equity capital and debt capital respectively, then compares this influence. Through the empirical analysis, the results indicate that:First, all else being equal, both the cost of capital and cost of debt increases with the intensity of accrual management and real earnings management. So, reducing the degree of earnings management and provides high quality of accounting information can help listed companies financing at a reasonable price in the securities market. Furthermore it is beneficial to the improvement of capital market efficiency. Second, the cost of debt increases to a greater extent than the cost of equity with the intensity of accrual management and real earnings management.The development of Chinese capital market has experienced from the planned economy guide the allocation of resources to gradually adopt the method of market regulation for the allocation of resources, so it is lack of empirical evidence about if the market can guide the allocation of resources according to situation of company financial quality. The conclusions of this paper indicate that the market can identify earnings management behavior of the corporate. Improving the reliability and relevance of earnings information will have very important significance for corporate investors, managers and government regulators. Investors can make more scientific investment decisions through paying attention to earnings quality; Enterprises can reduce the cost of capital and improve the its long-term competitiveness advantage through strengthening corporate governance and improving the degree of matching between corporate earnings information and real earnings; regulatory agencies can improve the efficiency of resource allocation in capital market through strengthening investor protection and improving earnings quality. Therefore, on one hand we should strengthen the construction of the enterprise accounting standards system, so that the ability to reflect company performance and basic value of accounting information system will be further strengthened. On the other hand, we should improve the system of information disclosure and strengthen supervision, so as to protect the basic rights and interests of investors, at the same time, it is helpful to improve the efficiency of resource allocation in capital market.