Author: Sang wook Lee(Seoul National University of Science and Technology)

The purpose of this paper is to empirically analyze how the main bank relations affect firms’ income-increasing earnings management. All listed non-financial companies in Korea from 2004 to 2011 are employed to analyze the research questions.

The results showed a negative impact of main bank relations on income-increasing earnings management. In addition, second main bank relations have no significant impact on income-increasing earnings management. However, foreign bank relations as a main bank have some meaningful impacts on income-increasing earnings management. 

The results might indicate a strong monitoring of main bank as an important corporate governance on income-increasing earnings management.