In this study, we examine the trade-offs between earnings management (both accruals and real) and covenant violations by examining how they are associated with future accounting and stock market performance. We analyze a matched-pair sample of covenant violation firms with non-violation firms that have a similar risk of a covenant violation. We have three main findings. First, our evidence indicates that covenant violations are costly events for shareholders as lenders appear to use their control rights in ways that increase the likelihood of loan repayment but impose costs for shareholders. Second, there is limited evidence indicating covenant-related accrual-earnings management activities impose significant costs on shareholders, but we find shareholders are worse off following unsuccessful real earnings management. Third, our evidence indicates that, on average, shareholders at high violation risk firms are better off when their firms successfully engage in accruals earnings management to avoid a violation compared to shareholders at firms that violate a covenant but do not manage earnings. Thus, covenant-related earnings management may be in the best interests of shareholders and is not necessarily evidence of shareholder-manager agency conflicts.

在本研究中，我们通过考察盈余管理（包括应计收益和实际盈余管理）与违反契约的行为与未来会计和股票市场表现的关系来考察它们之间的权衡。我们分析了违约公司与非违约公司的配对样本，这些公司具有相似的违约风险。我们有三个主要发现。首先，我们的证据表明，违反契约对股东来说是代价高昂的事件，因为贷方似乎以增加偿还贷款的可能性但给股东带来成本的方式使用他们的控制权。其次，有限的证据表明与契约相关的应计盈余管理活动给股东带来了巨大的成本，但我们发现股东在不成功的实际盈余管理后情况更糟。第三，我们的证据表明，与违反契约但不管理盈余的公司的股东相比，平均而言，当公司成功地进行应计盈余管理以避免违规时，处于高违规风险公司的股东会更好。因此，与契约相关的盈余管理可能符合股东的最大利益，并不一定是股东-经理代理冲突的证据。