This study analyzes the relationship between forbearance lending to financially distressed firms and earnings management by the deferred tax assets. Results of verification, financially distressed firms reduce the valuation allowance of the deferred tax assets to increase net incomes in the period before the banks lend additionally. Furthermore, we observe that the firms that have a stronger connection with the main bank and the higher possibility that the capital adequacy ratio of the main bank is subject to regulation, the above relationship is stronger. These evidences suggest that (main) banks are influencing the financial reporting of borrowing firms when doing forbearance lending.