Do cultural differences moderate the relationship between CSR and earnings quality: common law evidence pre and during COVID-19 crisis

Karima Lajnef and Siwar Ellouz

International Journal of Accounting & Information Management, 2024, vol. 33, issue 1, 213-240

Abstract: Purpose - This paper aims to describe the role of corporate social performance as a potential mechanism for reducing earnings management. This paper contributes to the existing literature by addressing the moderator effects of national culture on the relationship between CSR and earnings management. Design/methodology/approach - This study investigates the moderating impact of Hofstede’s cultural dimensions on the association between corporate social responsibility (CSR) and earnings management. The data set covers 71,893 firm-year observations spanning 2006–2022 and involving 4,229 firms listed in common law countries. Findings - The result confirms that corporate social performance reduces the use of real earnings management and controls the change of method AEM to REM method. When testing the indirect effect, the results show that cultural dimensions moderate the relationship between CSR and earnings management. These findings have many theoretical and practical implications for researchers, investors and decision-makers. Originality/value - This paper contributes substantially to extant literature by comprehensively exploring the moderating influence of national cultures on the intricate nexus between CSR and earnings management, encompassing the pre- and post-COVID-19 periods. The implications of these findings extend to researchers, investors and policymakers, offering valuable insights for informed decision-making.

Keywords: Corporate social responsibility (CSR); Earnings management (EM); Hofstede cultural dimension theory; Common law system; Moderating model; COVID-19 crisis (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eme:ijaimp:ijaim-02-2024-0046

DOI: 10.1108/IJAIM-02-2024-0046

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