The Effect Of Bank-enterprise Relationship On Real Earnings Management

Enterprise financing has always been one of the core issues of corporate finance research. For a long time, our country enterprise financing is mainly based on the indirect financing such as bank credit and so on. The development of capital market and bond market is slow, and the enterprise financing channel is single. As China is an emerging market country, on the one hand, the financial and legal system is not perfect, on the other hand, enterprises are facing more investment opportunities. When enterprises are faced with greater investment opportunities but they can not get the full amount of financing, companies have to give up some of the projects whose net present value is positive. Therefore, this behavior hinders the improvement of the enterprise value, further speaking, it is not conducive to the healthy development of our country’s economy. According to the relevant statistics of the People’s Bank of China, by the end of 2014, the proportion of RMB loans in the total size of social financing had still been as high as 59.59%. Besides, from 2004 to now, the absolute number of RMB loans increased year by year. The above statistics show that China’s enterprises always have a strong dependence on bank credit, and the financial needs of the real economy is very strong.In recent years, the research on earnings management from the perspective of financing motivation has been in the ascendant. The classical principal-agent theory thinks that the debt financing has the governance function, and it can restrict the managers’ earnings management behavior. However, debt financing itself may induce managers’ earnings management motivation. Meanwhile, with the improvement of the quality of personnel and the gradual improvement of accounting standards, the external market is constantly enhancing the recognition ability of the enterprise to manage the earnings management, which forces companies to shift to a more covert real earnings management to gloss over performance. Undoubtedly, this will damage the long-term value of the enterprise and also mislead the investors’ decision. Thus, in today’s scarcity of credit resource, how to prevent the earnings management behavior induced by financing has become a real problem which need to be addressed urgently.With the relationship between banks and enterprises as the starting point, based on the social capital theory and relational financing theory, this paper, which mentions the reality of financing demand and financing constraints that China’s enterprises are facing, has deduced enterprises’ real earnings management mechanism influenced by the relationship between banks and enterprises. What’s more, on the basis of the existing theoretical research, this paper has constructed an empirical model of real earnings management influenced by the relationship between banks and enterprises. Moreover, this paper has selected the panel data in 2005-2011 from the A-shares of the listed corporation as a sample to empirically test the model, so as to achieve mutual verification both theoretically and empirically.The following conclusions can be drawn by empirical analysis. Firstly, the real earnings management behavior induced by the financing demand is widespread in our country’s listed corporation. Secondly, there exists a negative correlation between the bank-enterprise relationship and real earnings management of enterprises, namely the existence of the relationship between banks and enterprises can weaken the enterprise earnings management motivation. Thirdly, there is a difference as for the above effect in enterprises of different nature. Compared with the state-owned enterprises, the relationship between banks and enterprises has a more obvious influence on the improvement of real earnings management of non state-owned enterprises. Therefore, in general, the existence of the relationship between banks and enterprises can not only ease enterprises’ financing constraints, but also help to improve the quality of accounting information of enterprises. The conclusions of this study has a contribution to understanding the function of the relationship between banks and enterprises at the present stage from many aspects. Thus, they can deepen the understanding of the channels and characteristics of enterprises’ growth. At the same time, through the inspection of the bank-enterprise relationship and real earnings management, it is also helpful for us to judge the rationality of this informal alternative mechanism so as to provide references for the decision of the relevant supervision departments.