Are Socially Responsible Companies Really Ethical? The Moderating Role of State-Owned Enterprises: Evidence from China

Xiangyu Chen, Muhammad Safdar Sial, Khoa Tran, Waseem Alhaddad, Jinsoo Hwang and Phung Anh Thu
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Xiangyu Chen: School of Accounting, Zhejiang University of Finance and Economics, Hangzhou 310018, China
Muhammad Safdar Sial: Department of Management Sciences, COMSATS University Islamabad (CUI), Islamabad 44000, Pakistan
Waseem Alhaddad: Banking and Finance Department, Al-Ahliyya Amman University, Amman 19328, Jordan
Jinsoo Hwang: The College of Hospitality and Tourism Management, Sejong University, 98 Gunja-Dong, Gwanjin-Gu, Seoul 143-747, Korea
Phung Anh Thu: Faculty of Finance and Accounting, Nguyen Tat Thanh University, Ho Chi Minh City 700000, Vietnam

Sustainability, 2020, vol. 12, issue 7, 1-19

Abstract: The present research aims to explore the relationship between corporate social responsibility and earnings management (EM). For this study, we utilized the panel data of companies registered with the Shanghai and the Shenzhen stock exchanges. The data consists of 10years of financial data from 2010 to 2019. After a thorough investigation, we discovered that CSR hurts the EM practice, which mainly relates to the prevalence of the ethical stance and the moral stance in corporate decision-making. When firms engage in activities about CSR, they tend to improve their corporate image and their social image as the stakeholder satisfaction level increases. The results also indicate that, when firms engage in these types of activities, they tend to incorporate practices related to CSR as part of their corporate strategy. This also results in a higher moral standing amongst the decision-makers, and they prefer to reject malpractices, such as EM, as a result. In the case of the Chinese state-owned firms, the results indicate that these companies increasingly engage in real earnings management (REM), even though they have increased their CSR activities. The results point towards management opportunism with Chinese state-owned companies.

Keywords: corporate social responsibility; accrual earnings management; real earnings management; ethical behaviour; employee satisfaction (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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