재량적 발생액과 부채조달비용 간의 관계에 대한 실증적 증거

The purpose of this study is to examine the relationship between discretionary accruals and cost of debt financing. Earnings management studies are common in accounting literature. Theory and evidence indicate that managers’ concerns over current performance motivate them to engage in boosting reported earnings. Analysis of earnings management often focuses on management’s use of discretionary accruals. Managers can exercise discretion over accrual choices that are allowed under GAAP in order to reach a desired level of earnings. This is, firms’ management manages earnings because they have some incentives to do so. However, earnings management hides a true performance of a firm from debtholders and other external parties. Earnings management also distorts quality of reported earnings, and quality of accounting information impacts debtholders’ estimates of future cash flows from which debt repayments will be served. As a result, opportunistic earnings management activities increase information asymmetries between managers and outside investors with respect to a firm’s true underlying performance, which in turn increase information risk faced by outside investors. Especially, debtholders have contractually fixed claims such as periodic interest payments. They tend to focus on future cash flows to ensure a firm’s ability to pay interest and principal. In addition, unless debtholders can “see through” and undo earnings management, their resource allocation decisions are potentially affected in a negative way. In that regard, examining the effect of opportunistic earnings management in the debt market is important. Prior studies expected that debtholders increase interest rates on firm’s debts when managers increase discretionary accruals (DA) for the purpose of opportunistic earnings management. This expectation is coming from debtholders’ point of view, because it is based on the assumption that rational debtholders can effectively see through a firm’s level of discretionary accruals. Then, prior papers assert that rational debtholders are able to see through managers’ attempts to opportunistically influence earnings perceptions and penalize firms for doing so by demanding a higher rate of return. However, from manager’s point of view, we should observe the negative relationship between discretionary accruals and cost of debt, so we will be able to explain the managers’ economic motivation to decrease cost of debt using discretionary accruals. Prior researches provide inconsistent empirical evidence on this relationship. Prevost et al. (2008) cannot find a significant relationship between discretionary accruals and cost of debt measured by bond’s yield spreads, while Park et al. (2011) and Lee and Ko (2012) find a significantly positive association between these two variables. However, these prior studies have several limitations. For example, Park et al. (2011) focus on bond issuing firms only and Lee and Ko (2012) measure discretionary accruals taking absolute value of them. Therefore, this study is meaningful because it extends prior researches and examines the association between cost of debt (YS) measured by borrowing’s yield spread and the level of discretionary accruals (DA). This paper analyzes all samples including not only bond issuing firms but also bond unissuing firms, and KOSPI and KOSDAQ listed firms in order to generalize the test results. Sample periods are from 2001 to 2011, and totally 10,479 firm-year samples are used in this research. This paper finds the following results. First, there is a statistically significantly negative association between cost of debt and discretionary accruals at 1% level, even after controlling firms’ credit ratings and other variables that can affect firm’s cost of debt. This result is consistent in full samples including KOSPI and KOSDAQ firms, and in each type of stock markets separately. Also, we find the same results no matter whether we use discretionary accruals in Dechow et al. (1995) or performance-adjusted discretionary accruals in Kothari et al. (2005). Meanwhile, this significantly negative association between two variables is coming from bond unissuing firms rather than bond issuing firms. Second, unlike the prior studies, we cannot find a statistically significant relation between cost of debt and discretionary accruals in bond issuing samples when we measure cost of debt using borrowing’s yield spread. This is an inconsistent result with Park et al. (2011). Third, following Prevost et al. (2008), we examine the association between cost of debt financing and interaction term of discretionary accruals and non-investment grade rating (i.e., high default risk firms), but we cannot find that the yield penalty for earnings management is significantly greater for non-investment grade rating, and moreover, debtholders cannot see through the information risk of increasing level of discretionary accruals and managers’ attempts of opportunistic earnings management. As a result, we find inconsistent empirical test results with Park et al. (2011) and Lee and Ko (2012). Overall, these findings suggest that debtholders do not see through accruals- based earnings management. In other words, this evidence suggests that debtholders do not perceive earnings management as opportunistic behavior. Accounting information plays an important role in the capital allocation process. Accordingly, understanding the debt market consequences of earnings management is a relevant and an important issue. In summary, this research implements various analyses to generalize the test result. We includes bond issuing firms and bond unissuing firms, and KOSPI and KOSDAQ firms. We use bare value of discretionary accruals, not just degree of DA, and performance-adjusted DA. We also use a different measurement of cost of debt financing, which is borrowing’s yield spread. With these various approaches, we find that discretionary accruals are statistically significantly negatively associated with cost of debt financing. Therefore, it can support the fact that managers do have economic motivation of opportunistic attempt of earnings management using discretionary accruals in order to reduce cost of debt. This implies that debtholders cannot effectively detect increasing information risk of firms due to the earnings management and they do make a capital allocation decision functionally fixed to reported earnings, although managers increase reported earnings using discretionary accruals in order to reduce cost of debt. Therefore, this study provides several meaningful contributions because it can be an evidence of inefficient allocation of resources in the debt market due to managers’ opportunistic attempts of earnings management. This research also contributes to provide useful information regarding earnings management to scholars, practitioners, accounting standard setters, and regulators alike. In addition, researchers who are interested in this area can also apply the discussion in this paper for future studies.