Earnings management and corporate social responsibility
Diego Prior,
Jorge Surroca Aguilar and
Josep Tribó
DEE - Working Papers. Business Economics. WB from Universidad Carlos III de Madrid. Departamento de EconomÃa de la Empresa
Abstract:
By drawing on stakeholder-agency theory and the earnings management framework, we hypothesize a positive connection between corporate social responsibility and earnings management. We argue that earnings management damages the interests of stakeholders. Hence, managers who manipulate earnings can deal with stakeholder activism and vigilance by resorting to corporate social responsibility (CSR) practices. Furthermore, CSR is a powerful tool that can be used to garner support from stakeholders and, therefore, provides an avenue for entrenchment to those managers that manipulate earnings, so as to reduce significantly their chances of being fired. Finally, we expect that the positive connection between corporate social responsibility and financial performance is negatively moderated when combined with earnings management practices. We demonstrate empirically our theoretical contention by making use of a database comprising 593 firms from 26 nations for the period 2002-2004.
Keywords: Corporate; social; responsibility; Earnings; management (search for similar items in EconPapers)
Date: 2007-09
New Economics Papers: this item is included in nep-bec and nep-soc
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Citations: View citations in EconPapers (3)
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Persistent link: https://EconPapers.repec.org/RePEc:cte:wbrepe:wb062306
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