How do Normative and Compliant CSR Affect the Earnings Quality of Japanese Firms?

Zhaoyan Gu, Keiichi Kubota and Hitoshi Takehara
Additional contact information
Zhaoyan Gu: CUHK Business School, Chinese University of Hong Kong
Keiichi Kubota: Graduate School of Strategic Management, Chuo University
Hitoshi Takehara: Graduate School of Business and Finance, Waseda University

The Japanese Accounting Review, 2017, vol. 7, 1-21

Abstract: This study investigates the empirical relation between the corporate social performance (CSP) and earnings quality of public firms in Japan. To investigate this query, we adopt several measures, including accruals-based earnings management (AEM) measures and real activities-based earnings management (REM) measures. In general, the comprehensive measurement of the CSP of Japanese firms is positively associated with earnings quality, suggesting that corporate social responsibility (CSR) activities may improve the earnings quality of Japanese firms. However, a more detailed investigation using CSP dimensional indices reveals a number of in-depth findings. First, before controlling for financial performance, normative CSR is more strongly associated with the AEM measures, whereas compliant CSR is more strongly associated with the REM measures. Second, after controlling for financial performance in the regression analysis, the regression slopes of the compliant CSR dimensions are no longer statistically significant, implying the existence of a spurious correlation between compliant CSR and earnings quality. Finally, the slopes of the normative CSR dimensions remain significant even after controlling for financial performance. Overall, these results indicate that the managers of firms that show high normative CSR values tend to avoid adopting AEM and REM measures and that those firms that are conscious of CSR are more likely to gain investor confidence.

Keywords: Earnings Quality; Corporate Social Responsibilities; Normative CSR; Compliant CSR (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.rieb.kobe-u.ac.jp/tjar/article/vol7/pdf/7.01.GuKubotaTakehara.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kob:tjrevi:dec2017:v:7:p:1-21

Access Statistics for this article

The Japanese Accounting Review is currently edited by Hidetoshi Yamaji

More articles in The Japanese Accounting Review from Research Institute for Economics & Business Administration, Kobe University Contact information at EDIRC.
Bibliographic data for series maintained by TJAR Editorial Office ().