Can banks identify firms’ real earnings management? Evidence from China

Authors/Creators

Yuanhui Li
Weiqian Nie
Erwei Xiang, Edith Cowan UniversityFollow
Hadrian Geri Djajadikerta, Edith Cowan UniversityFollow

Abstract

This paper investigates the impact of real earnings management on bank lending decisions and the moderation effects of state ownership and marketization in China. We find (1) firms with higher real earnings management get more and lower-cost loans, which indicates that banks cannot identify firms’ real earnings management; (2) state-owned enterprises (SOEs) with higher real earnings management obtain more loans, while non-SOEs with higher real earnings management are more likely to obtain low-cost loans; (3) firms in regions with lower degree of marketization are more likely to get more and low-cost loans via real earnings management.

Document Type

Journal Article

School

School of Business and Law

RAS ID

26696

Copyright

subscription content

Publisher

Elsevier Inc

Comments

Li, Y., Nie, W., Xiang, E., & Djajadikerta, H. G. (2018). Can banks identify firms’ real earnings management? Evidence from China. Finance Research Letters, 25, 23-29. https://doi.org/10.1016/j.frl.2017.10.005