Real Earnings Management through Syndicated Lending

54 Pages Posted: 13 Oct 2016 Last revised: 26 Jul 2017

Date Written: July 25, 2017


I examine banks' management of earnings through syndicated lending activities. This novel setting allows a transaction-specific, within-quarter analysis of real earnings management. My findings suggest that public lenders that narrowly beat earnings benchmarks, to book origination fees, initiate more loans in the last month of fiscal quarters. I also find that this boost in lending is not costless: These loans are offered at a 3–7 percent discount and under-perform. Overall, I provide model-free evidence of real earnings management and quantify its costs. My findings also show that banks' financial reporting objectives influence corporate loan contracting and the real economy.

Keywords: Real earnings management, banking, lending, corporate finance, cost of debt, benchmark-beating

JEL Classification: G21, G24, G32, M41

Suggested Citation

Ertan, Aytekin, Real Earnings Management through Syndicated Lending (July 25, 2017). Available at SSRN: or

Aytekin Ertan (Contact Author)

London Business School ( email )

Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom
00442070008131 (Phone)


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