Financial Leverage, Agency Costs And Earnings Management

With the rapid development of China's capital market,especially the bond market,the listed companies are increasingly aware of the importance of earnings management.We can commonly see that the listed company have earnings management behaviors because of the information asymmetry between the principal and the agent and the conflict of interests.Earnings Management has become one of the important research topics in corporate finance and corporate governance in China.We can see from previous research that scholars' research on earnings management mainly focused on the motives of earnings management,the impact of corporate governance,equity nature and executive incentives on earnings management.Some scholars also studied the impact of debt financing on earnings management from the view of debt market.But there were different conclusions.Then in China's listed enterprises,what is the impact of debt financing on earnings management? It is necessary to do more Research.This paper uses both theory and empirical methods to study the selected problems.Although there are many research on financial leverage,agency costs and earnings management,there are little studies that put these three together.Therefore,from the perspective of creditor governance,this paper takes agency costs as the starting point and studies the impact of financial leverage on earnings management in listed companies.Firstly,it reviews the related research on financial leverage,agency cost and earnings management of listed companies,and then uses relevant theories to analyze the impact of financial leverage and agency costs on earnings management.In the empirical part,this paper analyzes the data of listed companies' manufacturing industry from 2012 to 2016,and discusses the role of financial leverage in earnings management through descriptive statistical analysis,correlation analysis and regression analysis,and studies how financial leverage affects earnings management through agency costs.Through the research,it is found that:(1)financial leverage will encourage earnings management behavior of corporate management;(2)financial leverage increases the agency cost of the enterprise;(3)through the mediation effect test,it is found that financial leverage can stimulate the earnings management behavior of the management through partial increase of agency costs,that is,agency costs plays a part intermediary role between financial leverage and earnings management.Finally,based on the above conclusions,relevant policies and recommendations are proposed.These conclusions have important implications for the improvement of relevant theories.At the same time,they help listed companies improve their capital structure,play the role of financial leverage,reduce agency costs,and curb corporate earnings management behavior.