Abstract: The quality of earnings is an important basis on which creditors make decisions. By making use of the related data from 2009 to 2011 of China’s A share listed companies in Shanghai and Shenzhen stock exchanges, this paper conducts an empirical test. The results show that the internal control is the guarantee of the quality of corporate surplus. However, with the improvement of internal control effectiveness in listed company, the creditors’ capacity to identify the quality of corporate surplus during the long-term debt decisions-making would decline significantly, which demonstrates that internal control and earnings quality has a replacement value of signal transmission when creditors make decisions. Further study indicates that due to the difference of the nature of property rights and of the marketization process in the areas that the listed companies locate, there is a significant difference in the creditors’ capacity to identify the quality of corporate surplus when they make decisions.

Key words: internal control; earnings quality; long-term debt decision-making; debt maturity