Research on Debt Governance, Earnings Quality and Capital Allocation Efficiency

Debt financing is the company's main source of external funding. As the creditors provided funds to the company, in order to maintain their funds security, they should participate in the corporate governance, supervising and controlling the business management behavior of the enterprise, and exerting the debt governance. This study used the Shanghai-Shenzhen A-share listed companies from 2008 to 2017 as samples, examined the relationship between debt governance and the effect of earnings management on capital allocation in China's capital market. We found that debt governance is affected by the nature of property rights. Compared with non-state-owned enterprises, creditors have higher governance effects in state-owned enterprises and can effectively improve their capital allocation efficiency. Debt governance is also affected by the debt maturity structure. Creditors have higher governance effects in companies with a high short-term debt ratio, and it is difficult for creditors to take part in corporate governance through long-term debt. This study provides evidence for the effectiveness of China's debt market.