The relationship between corporate social responsibility, financial misstatements and SEC enforcement actions

Nam Tran and Don O'Sullivan

Accounting and Finance, 2020, vol. 60, issue S1, 1111-1147

Abstract: This study explores the relationship between corporate social responsibility (CSR), financial misstatements and SEC enforcement actions. We find that firms with higher CSR are less likely to receive SEC enforcement actions for financial misstatements. Drawing on insights from stakeholder theory and the reputational literature, we identify two channels underpinning this relationship: (i) firms with higher CSR are less likely to engage in financial misstatements and (ii) the reputational effect of CSR reduces the likelihood of SEC enforcement actions. We find empirical evidence consistent with both channels.

Date: 2020
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