Do Bankers Use Managerial Discretion with Regard to CSR and Earnings Management to Rebuild Their Reputation in the Aftermath of the Financial Crisis?

In this paper the authors examine the relationship between CSR (Corporate Social Responsibility) performance and earning management in the banking industry from 2008 to 2012 having a specific focus on managerial behaviour and its impact on banks' reputation. They propose that when managers opportunistically engage in CSR, they will also engage in opportunistic earnings management but if they engage in CSR practices because it is the socially ‘right thing to do' then earnings will better reflect banks' true economic performance. Finally, they expect that when bank managers recognize the importance of societal trust they use their discretion to regain trust and to rebuild reputation. Their results show that in general, banks that perform high on CSR indicators behave more transparently with regard to the presentation of earnings. Banks that engage in CSR activities to improve their reputation, use managerial discretion to show socially desirable earnings numbers. For banks that value their reputation, pursuing societal trust is more important than the fulfilling of self-interest.

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DOES CORPORATE SOCIAL RESPONSIBILITY AFFECT EARNINGS MANAGEMENT? EVIDENCE FROM THE INDONESIAN BANKING INDUSTRY

Verslas teorija ir praktika ◽

10.3846/btp.2019.35 ◽

2019 ◽

Vol 20 (0) ◽

pp. 372-378

Author(s):

Doddy Setiawan ◽

Ronny Prabowo ◽

Vina Arnita ◽

Anas Wibawa

Keyword(s):

Corporate Social Responsibility ◽

Social Responsibility ◽

Earnings Management ◽

Banking Industry ◽

Emerging Market ◽

Developed Countries ◽

Positive Effects ◽

Final Sample ◽

Corporate Social ◽

The Relationship

This paper aims at examining the effect of corporate social responsibility on earnings management in the Indonesian banking industry. Using Indonesian publicly listed banking firms in the years of 2013–2015 as the sample, we generate 94 firm-year observations as the final sample. The results show that corporate social responsibility positively affects earnings management, suggesting that the higher the corporate social responsibility score, the greater earnings management. Further, the study investigates the effects of corporate social responsibility on absolute earnings management, positive earnings management, and negative earnings management. The results robustly demonstrate the positive effects of corporate social responsibility on earnings management. Thus, this study implies that investors need to be cautious of banks that engage in higher corporate social responsibility because they are more likely to exhibit greater earnings management. While most of the previous studies in this issue focus on developed countries as their research settings, this study provides empirical evidence on the relationship between corporate social responsibility in Indonesia as an emerging market.

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The relationship between corporate social responsibility disclosure and earnings management: is it a complement mechanism or a substitute mechanism?

International Journal of Business Governance and Ethics ◽

10.1504/ijbge.2018.095411 ◽

2018 ◽

Vol 13 (1) ◽

pp. 1 ◽

Cited By ~ 2

Author(s):

N.A. Faisal ◽

Alif Rishal Prasetya ◽

Anis Chariri ◽

N.A. Haryanto

Keyword(s):

Corporate Social Responsibility ◽

Social Responsibility ◽

Earnings Management ◽

Corporate Social Responsibility Disclosure ◽

Corporate Social ◽

The Relationship

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CORPORATE SOCIAL RESPONSIBILITY AND EARNINGS MANAGEMENT: THE ROLE OF CORPORATE GOVERNANCE

Humanities & Social Sciences Reviews ◽

10.18510/hssr.2019.75172 ◽

2019 ◽

Vol 7 (5) ◽

pp. 1338-1347

Author(s):

Gemi Ruwanti ◽

Grahita Chandrarin ◽

Prihat Assih

Keyword(s):

Corporate Governance ◽

Corporate Social Responsibility ◽

Social Responsibility ◽

Earnings Management ◽

Firm Size ◽

Good Corporate Governance ◽

Corporate Social ◽

Relationship Of ◽

The Relationship

Purpose: The purpose of this paper is to examine the role of corporate governance in the relationship of Corporate Social Responsibility (CSR) and firm size to earnings management of manufacturing firms in Indonesia. Methodology: The study draws on data from 66 firms listed in Indonesian Stock Exchange from 2014 to 2017, using a multiple regression model. The present study examines the influence of CSR on earnings management, and the impact of corporate governance on the relationship between CSR and firm size with earnings management. Main Findings: The finding showed that the effect of CSR on earnings management was significant and positive. The study also finds a statistically significant negative relationship between firm size and earnings management. The evidence also shows the role of corporate governance in the relationship of CSR and firm size to earnings management is significant and negative, it means that when the firm has good corporate governance, the firms that allocate CSR funds are relatively large, then it will tend not to practice earnings management, likewise large firms with good corporate governance will tend not to do earnings management. Research limitations/implications: The present study does not include all possible other variables that influence earnings management. Further research might increase the scope of research objects by extending the study period and need to pay attention to the firm's macro factors or economic risk factors outside of financial performance so as to provide a more comprehensive picture of the results of the study. Originality/value: The study focuses on the role of corporate governance issues such as the independence and activity of the boards and their influence on earnings management. The subject analyses the possible impact of CSR and firms size-related earnings management that has received much attention from academic research, which has largely focused on studying the publications of corporate governance in Indonesia context and can be contributes thoughts about the importance of corporate social responsibility activities that are reported as a basis for consideration incorporate policy-making to further enhance corporate awareness in the social environment, as well as the importance of corporate governance to minimize earnings management practices.

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Corporate social responsibility, firm performance and the moderating effect of earnings management in Chinese firms

Asia-Pacific Journal of Business Administration ◽

10.1108/apjba-03-2018-0051 ◽

2018 ◽

Vol 10 (2/3) ◽

pp. 184-199 ◽

Cited By ~ 11

Author(s):

Muhammad Safdar Sial ◽

Zheng Chunmei ◽

Tehmina Khan ◽

Vinh Khuong Nguyen

Keyword(s):

Corporate Social Responsibility ◽

Firm Performance ◽

Social Responsibility ◽

Earnings Management ◽

Generalized Method Of Moments ◽

Chinese Firms ◽

Content Type ◽

Corporate Social ◽

The Impact ◽

The Relationship

Purpose The purpose of this paper is to examine the relationship between corporate social responsibility (CSR) and firm performance and the moderating role of earnings management on the relationship between CSR and firm performance. Design/methodology/approach The empirical study used the updated data set (3,481 unbalanced observations for period 2009–2015) from Chinese listed companies on Shenzhen and Shanghai stock exchanges. The generalized method of moments (GMM) statistical approach has been used for the analysis. The authors utilized STATA to test GMM on a sample of Chinese listed firms data over the period 2009–2015. The unbalanced sample obtained 3,481 observations from China stock market and accounting research database and CSR ratings provided by Rankins (RKS). Findings The results demonstrated that CSR has a positive and significant relationship with firm’s performance; also, earnings management has a negatively moderate relationship between CSR and firm performance. These results imply that a high value of earnings management, which results in high level of symbolic CSR, converts to low firm performance of the Chinese firms. CSR actions (only as symbolic measures) promoted by managers as a means to cover their profit management incite an adverse effect on the company’s performance. This study has highlighted the impact of two different corporate social responsibilities: substantive and symbolic (genuine CSR vs greenwashing) on firm performance. Research limitations/implications The results of this investigation will be of distinct interest to company owners who wish to ascertain the effectiveness of the sustainability decisions of directors and managers, and also to investors and public authorities to estimate the positive relationship between CSR and company’s reputation and image, and thus, the positive influence on firm performance. Originality/value Previous studies have generally focused on the relationship between CSR and firm performance. This study provides the impact of earnings management (measurement of both aspects of accrual-based earnings management and real earnings management) on this relationship. Furthermore, this study examines the state of CSR in the Chinese market and provides empirical evidence of this relationship in emerging markets.

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