Executives With Banking Background,methods Of Earning Management And New Debt Financing

Accounting information is an important factor for the creditors to make debt decisions.In order to get more money,the managers of enterprises have enough motivation to implement earning management to meet the requirement of the creditors.It has been pointed out that the enterprises will try to meet the requirements of creditors through discretionary accruals.However,more and more scholars have found that enterprises will also use real earning management to manipulate earnings,for the reason that the accounting policies have become stricter.But at present,few papers have involved the real earning management in study.In addition,executives with banking background can increase the opportunity for enterprises to obtain more information and resources.They are more familiar with the process of debt decisions and have the ability to help the executives conduct earning management to get more loans.Based on the sample of listed companies in Chinese A stock market from 2005 to 2012,the study investigates the relationship between different methods of earning management and new debt financing.The result shows that companies can get more loans through any method of earning management.But discretionary accruals can't help the company get more long-term debt.The study also finds that the companies with banking background prefer to use discretionary accruals in order to get more short-term loans.At the same time,in financially constrained firms and strong-growth companies,executives with banking background will help the company get more loans both through real earning management and discretionary accruals,and in other unconstrained firms,executives only tend to use discretionary accruals.