Bank intervention and firms’ earnings management: evidence from debt covenant violations

IF 1.9 Q2 BUSINESS, FINANCE Review of Quantitative Finance and Accounting Pub Date : 2024-03-12 DOI:10.1007/s11156-024-01255-7

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Abstract

Earnings management has long been one of the main concerns in accounting and management literature, and the extent to which corporate governance mechanisms can discipline management behaviour and prevent earnings management has attracted increasing interest among policy makers and academic researchers. Differing from previous corporate governance literature that focuses mainly on the board and auditors, we explore the role of creditors in corporate governance. In particular, we examine the effect of bank intervention on earnings management via the lens of debt covenant violations, where control rights are transferred to creditors (banks). Using a Difference-in-Difference approach, we find that firms reduce both their accruals-based and real earnings management following debt covenant violations. The negative effect on earnings management is more prominent when banks possess greater bargaining and monitoring power and when firms are more financially constrained. By identifying a specific channel through which debt providers influence corporate financial reporting, our findings suggest that creditors can play an important role in governing organisations and disciplining management behaviour.

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银行干预与企业盈利管理：违反债务契约的证据

摘要长期以来，收益管理一直是会计和管理文献关注的主要问题之一，而公司治理机制能在多大程度上约束管理层行为并防止收益管理，也引起了政策制定者和学术研究人员越来越多的兴趣。与以往主要关注董事会和审计师的公司治理文献不同，我们探讨了债权人在公司治理中的作用。特别是，我们从违反债务契约（控制权转移给债权人（银行））的角度来研究银行干预对收益管理的影响。利用差分法，我们发现企业在违反债务契约后会减少权责发生制和实际收益管理。当银行拥有更大的议价权和监督权以及企业受到更大的财务约束时，对收益管理的负面影响更为突出。通过确定债务提供者影响企业财务报告的特定渠道，我们的研究结果表明，债权人可以在管理组织和约束管理行为方面发挥重要作用。

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来源期刊

Review of Quantitative Finance and Accounting BUSINESS, FINANCE-

CiteScore

3.20

自引率

17.60%

发文量

期刊介绍： Review of Quantitative Finance and Accounting deals with research involving the interaction of finance with accounting, economics, and quantitative methods, focused on finance and accounting. The papers published present useful theoretical and methodological results with the support of interesting empirical applications. Purely theoretical and methodological research with the potential for important applications is also published. Besides the traditional high-quality theoretical and empirical research in finance, the journal also publishes papers dealing with interdisciplinary topics.