Does Corporate Social Responsibility Reduce Earnings Management? The Moderating Role of Corporate Governance and Ownership

Abstract

The purpose of this paper is to investigate the relationship between corporate social responsibility and earnings management and the moderating effect of corporate governance and ownership structure on this relationship. Using panel data for a sample of French listed companies between 2010 and 2013, we find that CSR engagementconstrain earnings management practices suggesting that managers would comply with the ethical requirements and satisfy stakeholders’ interests. The results also show that the effect of CSR on earnings management is particularly stronger in more independent boards and with high institutional ownership structure. These corporate governance devices help mitigating managerial opportunistic behavior.

Do Corporate Social Responsibility and Investor Protection Limit Earnings Management? Evidence from Indonesia and Malaysia

“…Previous studies have disclosed that the relationship between corporate social responsibility and earnings management was positive and significant (Habbash & Haddad, 2019;Jiang et al, 2013;López-González et al, 2019;Shafai et al, 2018). In contrast, Ajina et al (2019); Ben Amar and Chakroun ( 2018 Scholtens and Kang (2013) found that corporate social responsibility had a significant adverse effect on earnings management. Therefore, the researchers formulated the following hypothesis: H 1 : Corporate social responsibility disclosure has a significant negative effect on earnings management Further, earnings management is an action intentionally carried out by management in presenting misguided information about company performance so that shareholders change their decision (Schipper, 1989).…”

“…In addition, management as a party with more information about the company can manipulate information provided to shareholders so that shareholders are wrong in making decisions (Mayapada, 2018). However, management must take these opportunistic actions carefully so that management is not acted upon by shareholders, including using corporate social responsibility to mislead shareholders of the real value of the firm and its real performance (Ajina et al, 2019).…”

“…Meanwhile, the previous study result found that the company upholding ethical values would perceive earnings management as unethical behavior (Elias, 2004). Therefore, some previous studies uncovered that company management reporting corporate social responsibility activities tended not to do earnings management (Ajina, Lakhal, & Ayed, 2019;Ben Amar & Chakroun, 2018;Jordaan, De Klerk, & De Villiers, 2018;Kim, Park, & Wier, 2012;Saeed, Hashmi, & Javid, 2019).…”

Corporate Social Responsibility and Real Earnings Management: Does Board Gender Diversity Matter?

“…The mixed results can be attributed to different contexts and, therefore, different studied legal frameworks and the different earnings management measures used. From a review of published papers between 2008 and 2016 by Rahman and Chowdhury (2020), we noticed that most studies use AEM as an EM measure (Almahrog et al, 2018;Amar & Chakroun, 2018;López-González et al, 2019;Ajina et al, 2019). Generally, REMrelated studies jointly deal with AEM.…”

“…Prior empirical research works provide evidence on the difference between REM and AEM activities in their relationship with CSR (Bozzolan, Fabrizi, Mallin, & Michelon, 2015;García-Sánchez & García-Meca, 2017;Jordaan, De Klerk, & De Villiers, 2018;Kim, Udawatte, & Yin, 2019). First, while prior studies on the French context focused on AEM (Amar & Chakroun, 2018;Ajina, Lakhal, & Ayed, 2019), we aimed to define the effect of CSR on REM activities. Second, we emphasized the moderating role of board gender diversity in the CSR-REM relationship in the French context.…”