Mandatory Disclosure of Corporate Social Responsibility and the Quality of Earnings Management

Qunpeng Fan, Dongphil Chun, Qi Ban, Yitong Jiang (), Huiting Li and Luyuan Xu ()
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Qunpeng Fan: School of Economic, Management and Law, Jilin Normal University, Siping 136000, China
Dongphil Chun: Graduate School of Management of Technology, Pukyong National University, Busan 48547, Republic of Korea
Qi Ban: School of Finance, Nankai University, Tianjin 300350, China
Yitong Jiang: School of Economics, Shanghai University, Shanghai 201800, China
Huiting Li: School of Foreign Languages for Business, Guangxi University of Finance and Economics, Nanning 530007, China
Luyuan Xu: School of Economics and Trade, Guangxi University of Finance and Economics, Nanning 530007, China

Sustainability, 2023, vol. 15, issue 17, 1-20

Abstract: Using the exogenous shock caused by the mandatory corporate social responsibility (CSR) information disclosure policy in 2008, this paper examines the impact of mandatory CSR information disclosure on the earnings management activities of listed firms in China from the perspective of external corporate regulation based on the Difference-in-Differences (DID) method. The results show that mandatory CSR information disclosure can significantly improve the quality of firms’ earnings management. The mechanism analysis shows that the policy’s enhancement of the effectiveness of external regulation by regulators and the media played an important role in curbing firms’ earnings management activities. The heterogeneity analysis shows that the inhibitory effect of mandatory CSR disclosure policy on firms’ earnings management activities is better in firms with lower analyst coverage and lower institutional ownership. The study further extends the mechanism of the impact of mandatory CSR disclosure on firms’ earnings management activities, and provides practical guidance on how to improve the quality of firms’ earnings management and enhance the efficiency of corporate governance.

Keywords: mandatory CSR information disclosure; DID; earnings management; external supervision effectiveness (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2023
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