Can The Bank Identify The Earning Management Behavior Of Enterprise?

The public companies have strong incentives to earning management for different development goals, for example to improve the stock price, to increase the other right issues, to avoid operating losses and to increase profits. In recent years, company executives achieve to the purpose of personal interests, who have manipulated earning management. The quality of accounting earnings is very serious, which lead to the public company’s financial reporting has been distorted many terms. Previously scholars paid more attention to the accrued earning management whether banks can identify corporate earning management. With further research, scholars have found and began to focus on another earning management——real earning management which manipulated sales, controlled production and changed real transactions in business performance. With respect to the accrued earning management, company executives are more willing to manipulate the actual business activities to adjust surplus. The reason for this phenomenon is that the companies adjust the conditions of sale and change production through real business activities. The way to regulate earnings is very hidden and confused; therefore company executives use real earning management more and more popularity.As with rapid development of financial innovation services and internet "+" mode, the scale of financing is much bigger. Financial channel is more popular in society. However, according to the survey from the Statistics Department in People’s Bank of China, the financing share of loans from the listed companies remained at 60%. In the period of economic reforming, financing structure of listed companies are single and over-reliance on bank loans. Bank is the enterprise most important financiers to help them development and prosperity. To reduce the risk of bank loans from enterprises, the bank investigates the operation condition and credit capacity. Despite the market-oriented reform in the banking sector, whether the reform of the bank is effective and measures to strengthen credit risk management properly, it is more worthy of attention and studying, including the bank’s ability to identify earning management.If the bank can identify earning management, or can partially recognize, it means that the credit risk control measures for banks is still effective. The bank strengthens the management which recognize partly in the future. If the bank cannot recognize almost, it shows that China’s commercial banks preventive measures are not success; the bank need further reform and improve. This is the significance of this study.The main contents of this paper are consisted of the following components:The first chapter is introduction:this contains research background, the significance of research, research content, research framework map, research ideas and research innovations.The second chapter is literature review:we study that the bank recognizes the corporate earning management, therefore, mainly including the literature of earning management and banking credit contracts, the relationship between each other.The third chapter is theoretical analysis and research hypothesis:in this section, the first study of this thesis is a theoretical sort involved the theory of asymmetric information, agency theory and the theory of debt covenants. Accordingly, this paper comes up with hypothesis.The forth chapter is the research design. This contains variable setting and the model of the bank identificiton. The dependent variables:bank lending rates, new bank loans and bank loan term structure. The independent variables:accrued earning management and real earning management. Refer to previous research results to select control variables:asset liability ratio, earnings volatility, operating income growth, etc. Finally to set up the model of the bank identification to hypothy verification results.The fifth chapter is empirical analysis. This contains descriptive statistics, correlation test, multiple regression analysis, multicollinearity test and robustness test. We carry out that the bank lending rates, new bank loans and bank loan term return accrued earnings management and real earnings management to examine the model and draw conclusions.The sixth chapter is conclusions, suggestions and drawbacks:We summarize the conclusions of the study; we suggest the banks how to indentify earning management; finally, the limitation of this paper.The conclusions are as follows:when banks decide bank lending rates, new bank loans and bank loan term structure, they can identify accrued earning management. When banks decide new bank loans and bank loan term structure, they can identify the real earning management, but when banks decide bank lending rates, they cannot identify the real earning management.The innovations are listed:The existing literature only studied that the banks affected corporate governance. And now there is not direct research on identifying the role of banks in the company’s earnings management. In the study of existing bank earning management identified, most of them are accrued earning management for the study and the study of real earning management is less.In the case of the increasingly enhanced regulatory environment, managers have reduced accrued earning management and managers are using more real earning management activities. Therefore, from two sides to study is in accordance with the development trend of modern enterprise.