Abstract: Different from the previous earnings management studies which focus on the capital market motives in equity financing, this paper discusses the earnings management behaviors based on capital market motives in the debt financing of listed companies. The empirical analysis finds that when the A-share mainboard companies listed in Shanghai and Shenzhen stock markets carried out debt financing during the period of 2007-2011, whether in the form of direct financing by issuing bonds publicly or in the form of indirect financing by obtaining loans from the banks, the generation of new debt would induce the enterprises to make the upward adjustment of the earnings level. Besides, since the supervision efficiency in public debt market is weaker than that of the banks, the way of direct financing in bond issuing would have more significant impact on the enterprises’ earnings control.

Key words: bank loans; corporate bonds; earnings managemen of accrued items; earnings management of authentic activities