CSR disclosure and state ownership: implications for earnings management and market value

Abstract

PurposeThis paper explores the relationship between earnings management and firms' value through the moderating effect of the missing elements – corporate social responsibility (CSR) disclosure and state ownership in Russian companies. The main argument of the paper is that CSR disclosure can be used as a mitigating mechanism to weaken the negative relationship between earnings manipulation and market value. Additionally test whether state ownership is an important moderating factor in this relationship are conducted as state has always played an important role in the emerging Russian market.Design/methodology/approachThe hypotheses are tested on panel data for 223 publicly listed Russian firms for the period 2012–2018. A number of robustness tests are used to check the obtained results for consistency. Following previous research GMM method is employed to address endogeneity concerns.FindingsSupported by stakeholder theory, it is observed that firms that disclosed more CSR information experience a weaker negative relationship between earnings management and market value because investors and other stakeholders positively evaluate a positive CSR image. This negative effect of earnings management on market value is even weaker for state-owned companies as market participants appreciate involvement of state-owned companies in CSR activities and place greater expectations on these firms to be responsible without clear understanding whether these actions are “window dressing” for this type of companies or not.Originality/valueThe study results provide new insights into the relation between earnings management, firm's value, CSR disclosure and state ownership in emerging-market firms. The paper highlight the importance of considering country-specific factors, such as state ownership, while analysing the market reaction on CSR disclosure and earnings management since the institutional peculiarities may help to explain differences in the obtained results.

Determinants Of Company Value In Energy Sector Companies

“…Companies are not only expected to focus on financial responsibility but must also pay attention to their responsibilities towards the environment and society (Adelina & Arza, 2021). According to (Garanina, 2023), CSR disclosure serves as a valuable tool to obscure the opportunistic behaviour of managers, which in turn can impact increasing the company's value. CSR disclosure should be disclosed separately in a sustainability report, which describes reporting on corporate responsibility for environmental, economic, and social aspects.…”

Pengaruh Pemisahan Hak Aliran Kas Dan Hak Kontrol Terhadap Manajemen Laba Akrual Dan Manajemen Laba Riil

“…Ekuitas pemegang saham tersebut diperoleh dengan mengurangi total aset dengan total liabilitas, sedangkan kapitalisasi pasar diperoleh dengan mengalikan harga saham penutupan di akhir tahun dengan jumlah lembar saham yang beredar. Enam variabel kontrol tersebut digunakan dalam penelitian Garanina (2023), Gavana et al (2022), Kim & An (2018)…”