Is Earnings Quality Associated with Corporate Social Responsibility?

2012 ◽  
Vol 87 (3) ◽  
pp. 761-796 ◽  
Author(s):  
Yongtae Kim ◽  
Myung Seok Park ◽  
Benson Wier
Keyword(s):  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Earnings Management ◽  
Financial Reporting ◽  
Data Availability ◽  
Socially Responsible ◽  
Financial Reports ◽  
Top Executives ◽  
Accruals Quality ◽  
Corporate Social

ABSTRACT This study examines whether socially responsible firms behave differently from other firms in their financial reporting. Specifically, we question whether firms that exhibit corporate social responsibility (CSR) also behave in a responsible manner to constrain earnings management, thereby delivering more transparent and reliable financial information to investors as compared to firms that do not meet the same social criteria. We find that socially responsible firms are less likely (1) to manage earnings through discretionary accruals, (2) to manipulate real operating activities, and (3) to be the subject of SEC investigations, as evidenced by Accounting and Auditing Enforcement Releases against top executives. Our results are robust to (1) controlling for various incentives for CSR and earnings management, (2) considering various CSR dimensions and components, and (3) using alternative proxies for CSR and accruals quality. To the extent that we control for the potential effects of reputation and financial performance, our findings suggest that ethical concerns are likely to drive managers to produce high-quality financial reports. Data Availability: Data used in this study are available from public sources identified in the study.

scholarly journals Doing Good with Creative Accounting? Linking Corporate Social Responsibility to Earnings Management in Market Economy, Country and Business Sector Contexts

2019 ◽  
Vol 11 (17) ◽  
pp. 4568 ◽  
Author(s):  
Mutuc ◽  
Lee ◽  
Tsai
Keyword(s):  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Earnings Management ◽  
Market Economy ◽  
Financial Reporting ◽  
Corporate Citizenship ◽  
Management Strategies ◽  
Business Sector ◽  
Socially Responsible ◽  
Corporate Social

The mandate of doing good with earnings management has been a subject of inconclusive findings from the past literature and leave issues on the benefits of socially responsible activities and financial reporting of the company. This study investigates the effects of corporate social responsibility (CSR) on accrual-based (AEM) and real-activities earnings management (REM). This study hypothesized that the trade-off exists between these two earnings management strategies, in light of increasing attention of CSR among Asian firms. In addition, this study examines whether the performance of firms in socially responsible activities exhibit different patterns of effect across the two measures of earnings management under the market economy, country, and business sector contexts. This study contemplates on 3906 firm-year observations from 2011 to 2017 of eleven countries in Asia. Our findings show that CSR conceals AEM while it constrains REM. These effects vary according to the market economy classifications, country, and business sector types. Each market, country and business sector has different standpoints in implementing CSR activities and earnings management relevant to the culture, macroeconomic considerations and demands from the stakeholders. Lastly, the discernment on the relevance of building corporate citizenship on financial reporting transparency is elaborated.

scholarly journals Corporate Social Responsibility and Earnings Management: Moderating Impact of Economic Cycles and Financial Performance

2021 ◽  
Vol 13 (17) ◽  
pp. 9969 ◽  
Author(s):  
Tiago Gonçalves ◽  
Cristina Gaio ◽  
André Ferro
Keyword(s):  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Earnings Management ◽  
Financial Performance ◽  
Financial Reporting ◽  
The European Union ◽  
Socially Responsible ◽  
Economic Cycles ◽  
Corporate Social ◽  
The Relationship

This study analyses the relationship between earnings management and corporate social responsibility. To this end, we use a sample of 568 listed companies from the European Union between 2010 and 2018. We use discretionary accruals as the measure of earnings management, under the Modified Jones model. Corporate social responsibility is proxied by the Combined Environmental, Social and Governance Score from the ASSET4 database. We find a negative relation between earnings management and corporate social responsibility, suggesting that managers from more socially responsible companies have a more ethical behavior and, thus, financial reporting of higher quality. Additional analysis provides evidence that economic cycles and financial performance play important roles in the relation between earnings management and corporate social responsibility. During periods of crisis or of losses, the relationship is positive, suggesting that under unfavorable economic conditions, management makes opportunistic use of a sustainable company’s status to manage earnings.

Corporate social responsibility and earnings management in the EU: a panel data analysis approach

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Panagiotis E. Dimitropoulos
Keyword(s):  
Corporate Social Responsibility ◽  
Panel Data ◽  
Social Responsibility ◽  
Earnings Management ◽  
Financial Reporting ◽  
Negative Association ◽  
Content Type ◽  
Corporate Social ◽  
The Eu

Purpose Over the past decades, corporate social responsibility (CSR) has been considered as a significant corporate strategy and also has been documented as a main information dissemination mechanism of corporations to shareholders, creditors and other external stakeholders. This fact makes the CSR activities and CSR performance interconnected with the quality of firms’ financial reporting. The purpose of this paper is to study the impact of CSR performance on the earnings management (EM) behaviour using a sample from 24 European Union (EU) countries summing up to 121,154 firm-year observations over the period 2003–2018. Design/methodology/approach The study uses a multi-country data set with various dimensions of CSR performance including indexes regarding workforce, community relations, product responsibility and human rights protection. The empirical analysis is conducted with panel data regressions. Findings Evidence supports the negative association between CSR and EM indicating that high CSR performing firms are associated with less income smoothing and discretionary accruals, thus with higher financial reporting quality. Practical implications Regulatory agencies in the EU could use the findings of the study for the improvement of the accounting framework via enhancing the use and publications of social and environmental responsibility information and reports. Social implications Also, the current paper could be of interest not only to academic researchers but also to potential and existing investors in European corporations. The negative association between CSR performance and EM could be used by investors in assessing the risk of firms and the quality and reliability of their financial information. Originality/value This is the first study within the EU, which considers the multi-facet characteristics of CSR on the quality of accounting earnings and offers useful policy implications for regulators and investors.

scholarly journals Does corporate social responsibility affect earnings management? Evidence from family firms

2019 ◽  
Vol 22 (2) ◽  
pp. 233-247
Author(s):  
Eva López-González ◽  
Jennifer Martinez-Ferrero ◽  
Emma García-Meca
Keyword(s):  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Earnings Management ◽  
Family Firms ◽  
Management Practices ◽  
Socially Responsible ◽  
Responsible Behavior ◽  
Panel Data Regression ◽  
Social And Environmental Performance ◽  
Corporate Social

The purpose of this paper is to shed light on the effect of corporate social responsibility performance on earnings management. We also examine the moderating role of family ownership on the association between earnings management and socially responsible performance. Based on an international sample of 6,442 firm-year observations from 2006 to 2014, we use several validated analysis and panel-data regression models. We find that social and environmental performance is positively related with earnings management; firms with a greater socially responsible performance show a higher discretionary behavior by promoting actions that mask the real financial and economic performance of the firm. However, we find that this positive relation is lower – moderated - in family-owned firms, mainly because of the fact that family firms show a greater socially responsible behavior aimed to preserve their socioemotional endowments and are negatively associated with earnings management practices.; El objetivo de este artículo es intentar aclarar el efecto de la responsabilidad social corporativa en la manipulación de información. También examinamos el efecto moderador de la familia en la relación entre manipulación de información y responsabilidad corporativa. Basados en una muestra internacional de 6,442 observaciones empresa-año durante los años 2006-2014, usamos análisis de validez y modelos de regresión para datos de panel. Hemos concluido que el desarrollo social y ambiental está positivamente relacionado con la manipulación de información; las empresas con una mayor actividad de responsabilidad social muestran un mayor comportamiento de manipulación a través de la promoción de acciones que enmascaran la realidad financiera y económica de la sociedad. Igualmente, encontramos que esta relación positiva es moderada a la baja en empresas familiares, principalmente porque las empresas familiares muestran una mayor responsabilidad social pues están centradas en conservar sus legados emocionales y así mismo están negativamente asociadas con prácticas relativas a la manipulación de información.

Accounting challenges for sustainability and innovations

2021 ◽  
Keyword(s):  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Research And Development ◽  
Financial Reporting ◽  
Socially Responsible Investing ◽  
Integrated Reporting ◽  
Socially Responsible ◽  
Responsible Investing ◽  
Socially Responsible Investments ◽  
Corporate Social

The aim of this e-book is to present the most important aspects related to sustainability, corporate social responsibility and innovation from an accounting perspective. The book contains parts that deal with accounting aspects of sustainability and innovations. The book consists of ten chapters devoted to relevant and topical issues of sustainability and innovations. Chapter 1 Sustainability and Corporate Social Responsibility in Accounting is an introduction to further considerations and deals with the essence of sustainable development, corporate social responsibility and their recognition in accounting. Chapter 2 Social Responsibility Reporting Standards presents the most important reporting guidance such as GRI, OECD, United Nations Global Compact, International Organization for Standardization. Chapter 3 Narrative reporting focuses on descriptions and explanations in accounting reports. The chapter presents the links between accounting and language, the development of accounting narratives and the factors determining the use of narratives. Chapter 4 Integrated reporting discusses the motivations, objectives and the process of preparing an integrated report. Integrated reporting can prove to be an effective tool for businesses looking to shift their reporting focus from annual financial performance to long-term shareholder value creation. Chapter 5 Non-financial reporting in selected European countries presents the experience of Croatia, the Czech Republic and Poland in the field of preparing non-financial reports. A significant contribution to promoting the importance of sustainability reporting was made by the Non-Financial Reporting Directive (2014/95/EU). Chapter 6, Socially Responsible Investments discusses the essence of socially responsible investing and socially responsible investment. Socially responsible investing (SRI) is a decision making process concerning the allocation of free financial resources, where the investor aims at maximization of profit and minimization of risk on one part and includes the socio-ethical and environmental-ecological considerations on the other. Chapter 7 External costs – accounting perspective describes costs connected with using goods such as air, soil, water, silence or the aesthetics of the surroundings. One of the biggest problems for accounting in the future will be measuring the volume of using these goods or measuring the size of reduction in the quality of public goods suffered and assigning the decrease to particular companies. Chapter 8 Derivatives in accounting is devoted to financial instruments and presents two different approaches to accounting of derivatives: general model and hedge accounting. Derivatives are used to protect the enterprise against financial risk related to changes in prices on the markets, changes in the exchange rate or changes in interest rates, as well as for commercial purposes. Chapter 9 Costs of Research and Development shows the company's activity in the field of research and development and the related costs. R&D constitute an increasingly important element of the functioning of enterprises. Chapter 10 Cryptoassets – Nature, Valuation and Disclosures in Accounting focuses on cryptocurrencies (e.g. Bitcoin, Ethereum etc.) and digital tokens which are specific rights or values representatives. As a result of the transformation on the financial market, we are currently dealing with cryptoassets, which are a creation of blockchain technologies and the changing habits of the digital society. One of areas that there are a lot of doubts regarding these new technological solutions is accounting.

scholarly journals Corporate Social Responsibility and Accrual-Based Earnings Management: Evidence from Nigeria

2021 ◽  
Vol 12 (5) ◽  
pp. 15
Author(s):  
Chinwe Claire Amake ◽  
Obehioye Usiomon Akogo
Keyword(s):  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Earnings Management ◽  
Stock Exchange ◽  
Control Variable ◽  
Least Square ◽  
Firm Characteristics ◽  
Manufacturing Companies ◽  
Socially Responsible ◽  
Corporate Social

This study examines the effect of corporate social responsibility (CSR) on accrual based-earnings management (AEM) nexus. We employed the use of panel least square analysis to test twenty (20) manufacturing companies quoted on the Nigerian Stock Exchange (NSE) for a period of seven (7) years (2013-2019). The study used corporate social responsibility as the independent variable, earnings management as the dependent variable and firm characteristics variables as the control variable. In utilizing the econometric models unreceptive to endogeneity, our result shows that corporate social responsibility has a positive and significant relationship with accrual based-earnings management. In addition, the study finds that firm size and leverage both have a negative and insignificant relationship with accrual based-earning management while profitability has a positive but insignificant relationship with accrual based-earnings management in Nigeria. The results show that more socially responsible firms have higher quality accruals. This suggests that manufacturing firms in Nigeria are likely to engage more in earnings management while increasing their corporate social responsibility. Hence, managers in manufacturing companies in Nigeria, have a tendency to take advantage of corporate social responsibility practices according to the environment they find themselves in.   Received: 8 July 2021 / Accepted: 8 August 2021 / Published: 5 September 2021

scholarly journals Corporate social responsibility in the light of the content of non-financial reports of construction-assembly production macro-sector companies

2019 ◽  
Vol 2019 (103 (159)) ◽  
pp. 169-182
Author(s):  
Wanda Skoczylas
Keyword(s):  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Development Strategy ◽  
Financial Reporting ◽  
Social Dimension ◽  
Financial Reports ◽  
The Sustainable Development ◽  
Environmental Initiatives ◽  
Corporate Social ◽  
Assembly Production

In the situation of dynamic changes in society and in the natural environment, the social dimension of activity, Guided by responsibility and commitment, matters more than ever before. Responsibility understood in this way is something other than greed, philanthropy or marketing. (Rojek-Nowosielska, 2017) . The consequence of this is building partner relationships based on communication between the organization and relevant stakeholders, and inclusion of social and environmental initiatives into the com-pany's strategy and their implementation. Transparent communication is promoted by the provisions of the Directive of the European Parliament and of the Council 2014/95 / EU and their transposition through amendment of the Accounting Act, introducing the obligation of non-financial reporting for a defined group of entities. The aim of the article is to identify and evaluate the corporate social responsibility strategies implemented on the basis of profile and detailed indicators presented in non-financial reports of companies of macro-sector 400: industrial and construction-assembly production, prepared according to the GRI 4 standard for 2017. The study included analysis of selected statements in reports on operations or separate reports of 14 companies that met the requirement of comparability. The research methods used include literature analysis, deduction, comparative analysis of structure indicators reported by the examined com-panies and GRI 4 structure indicators as well as indicators of intensity. The results of the conducted analysis confirmed the cognitive value of non-financial reports in assessing the implementation of the sustainable development strategy by all stakeholders. However, they showed the need to improve the content of these reports, including the wider publication of detailed, quantitative and leading indicators, and their interrela-tionship.

scholarly journals Literature Review on the Association between Earnings Management and Corporate Social Responsibility

2020 ◽  
Vol 5 (1) ◽  
pp. 22-31
Author(s):  
Ruksana Parvin ◽  
Md. Sohel Rana ◽  
Shahpar Shams
Keyword(s):  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Earnings Management ◽  
Firm Value ◽  
Ethical Issues ◽  
Negative Relationship ◽  
Tax Avoidance ◽  
Socially Responsible ◽  
Corporate Governance Practice ◽  
Corporate Social

This paper aims to give an overview of the existing literature on the Earnings Management (EM) and Corporate Social Responsibility (CSR) relationship in different countries. This paper reviews preceding studies concerned about EM, CSR and their relationship. Out of 23 works of literature, 11 studies found a negative relationship, 6 studies found a positive relationship, 2 studies found blended relationships in case of different situations and 4 studies found no connection between CSR and EM. Most of the results demonstrated that probably the socially responsible organizations have a negative correlation with EM practice. The types of the relationship depend on cause-effect relationship, information asymmetry, how can a company use resources, awareness on environmental issues, awareness on ethical issues, tax avoidance tendency, corporate governance practice, nature of the firm, political environment, opportunistic incentive, and stakeholder capital, manager's psychology, etc. Relationships between EM and CSR influence on earnings quality, firm performance, and firm value. 

Do Socially Responsible Firms Pay More Taxes?

2015 ◽  
Vol 91 (1) ◽  
pp. 47-68 ◽  
Author(s):  
Angela K. Davis ◽  
David A. Guenther ◽  
Linda K. Krull ◽  
Brian M. Williams
Keyword(s):  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Empirical Studies ◽  
Ordinary Least Squares ◽  
Data Availability ◽  
Tax Rates ◽  
Socially Responsible ◽  
Effective Tax Rates ◽  
Tax Payments ◽  
Corporate Social

ABSTRACT We investigate the relation between corporate tax payments and corporate social responsibility. Because existing theory and empirical studies find inconsistent evidence on the relation between these constructs, we investigate whether the two activities act as complements or substitutes. We estimate the relation between measures of corporate social responsibility and (1) the amount of corporate taxes paid, and (2) the amount invested in tax lobbying activities using both ordinary least squares and a system of simultaneous equations. We find consistent evidence that corporate social responsibility is negatively related to five-year cash effective tax rates and positively related to tax lobbying expenditures. Our evidence suggests that, on average, corporate social responsibility and tax payments act as substitutes. Data Availability: Data are available from sources identified in the paper.

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