Recently exposed financial fraud cases show that the financial manipulation means of enterprises are becoming more and more complex, showing the characteristics of the coordination between accrual earnings management and cash flow manipulation. However, the existing literature either ignores the particularity of cash flow manipulation based on cash basis and does not consider the difference between cash flow manipulation and real earnings management, or fails to alleviate the endogeneity between the two types of earnings management and pay no attention to the internal interaction and interaction mechanism between them.
Based on the understanding that cash flow manipulation is different from real earnings management, this paper selects Chinese A-share listed companies from 2007 to 2018 as research samples, and establishes the simultaneous equation model and adopts the three-stage least squares（3SLS）method to study the internal interaction between accrual earnings management and cash flow manipulation. It is found that there is a two-way asymmetric interaction between accrual earnings management and cash flow manipulation, that is, there is an interaction between cash flow manipulation and accrual earnings management, but in the process of cooperative control, the magnitude of cash flow manipulation is usually larger than the corresponding magnitude of accrual earnings management. When enterprises carry out positive accrual earnings management, the interaction between them will be stronger. Further research shows that excessive debt will further deepen the interaction between the two. Compared with state-owned enterprises, the coordination between accrual earnings management and cash flow manipulation in non-state-owned enterprises is more serious. Internal control, managerial stock holdings and proportion of independent directors, as the main means of corporate governance, have a significant inhibitory effect on the above relationship.
The main contributions of this paper are as follows: Firstly, by establishing a simultaneous equation model, this paper uses the 3SLS method to conduct an empirical analysis on the relationship between accrual earnings management and cash flow manipulation, which alleviates the endogeneity between variables and improves the scientificity of the research results. In addition, it deeply studies the interactive mechanism, focuses on the direction and symmetry of the above-mentioned relationship, and deepens the understanding of the relationship between accrual earnings management and cash flow manipulation. Secondly, this paper studies the regulating effect of the relationship between accrual earnings management and cash flow manipulation on debt stress motivation, and provides new evidence to clarify the regulatory focus of interactive fraud and reveal the internal linkage of the three major financial statements when financial fraud takes place. Finally, this paper is helpful to reveal the internal relationship between cash flow manipulation and accrual earnings management, as well as the interactive mechanism of the three major statements in the process of corporate financial manipulation. And it has enlightenment significance for comprehensively and accurately understanding the mutual influence and external influence of various financial manipulation behaviors, and building comprehensive and systematic governance, auditing, and supervision mechanism based on corporate financial manipulation.