Empirical Research on the Agency Cost of Free Cash Flow and Earnings Management

Earnings management of listing Corporation has been an important issue to hinder the healthy development of our securities market. Based on the free cash flow hypothesis, this article study the relation between free cash flow and earnings management with the data of Chinese manufacturing industry listed companies from 2011-2013 and the constraint effect of the debt level and the cash dividend on Earnings Management. The study results show that: the agency cost of free cash flow is one of the motivations for earnings management, and the higher of free cash flow, the more obvious of earnings management; Inhibitory effect of debt and cash dividend is not obvious.