Earnings management and corporate social responsibility
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.
|Date of creation:||Sep 2007|
|Contact details of provider:|| Web page: http://www.business.uc3m.es/es/index|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Michael C. Jensen, 2010.
"Value Maximization, Stakeholder Theory, and the Corporate Objective Function,"
Journal of Applied Corporate Finance,
Morgan Stanley, vol. 22(1), pages 32-42.
- Michael C. Jensen, 2001. "Value Maximization, Stakeholder Theory, And The Corporate Objective Function," Journal of Applied Corporate Finance, Morgan Stanley, vol. 14(3), pages 8-21.
- Michael Jensen, 2001. "Value Maximisation, Stakeholder Theory, and the Corporate Objective Function," European Financial Management, European Financial Management Association, vol. 7(3), pages 297-317.
- Steven J. Carlson & Chenchuramaiah T. Bathala, 1997. "Ownership Differences and Firms' Income Smoothing Behavior," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 24(2), pages 179-196.
- Tirole, Jean, 2001. "Corporate Governance," Econometrica, Econometric Society, vol. 69(1), pages 1-35, January.
- Tirole, Jean, 1999. "Corporate Governance," CEPR Discussion Papers 2086, C.E.P.R. Discussion Papers.
- Tiroley, Jean, 2000. "Corporate Governance," CEI Working Paper Series 2000-1, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
- Gillian H.H. Yeo & Patricia M.S. Tan & Kim Wai Ho & Sheng-Syan Chen, 2002. "Corporate Ownership Structure and the Informativeness of Earnings," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 29(7&8), pages 1023-1046.
- Leuz, Christian & Nanda, Dhananjay & Wysocki, Peter D., 2003. "Earnings management and investor protection: an international comparison," Journal of Financial Economics, Elsevier, vol. 69(3), pages 505-527, September.
- Cespa, Giovanni & Cestone, Giacinta, 2004. "Corporate Social Responsibility and Managerial Entrenchment," CEPR Discussion Papers 4648, C.E.P.R. Discussion Papers.
- Giovanni Cespa & Giacinta Cestone, 2007. "Corporate Social Responsibility and Managerial Entrenchment," CSEF Working Papers 173, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
- repec:bla:joares:v:29:y:1991:i:2:p:193-228 is not listed on IDEAS
- Kothari, S.P. & Leone, Andrew J. & Wasley, Charles E., 2005. "Performance matched discretionary accrual measures," Journal of Accounting and Economics, Elsevier, vol. 39(1), pages 163-197, February.
- Grace C.-M. Hsu & Ping-Sheng Koh, 2005. "Does the Presence of Institutional Investors Influence Accruals Management? Evidence from Australia," Corporate Governance: An International Review, Wiley Blackwell, vol. 13(6), pages 809-823, November.
- Dechow, Patricia M. & Sloan, Richard G., 1991. "Executive incentives and the horizon problem : An empirical investigation," Journal of Accounting and Economics, Elsevier, vol. 14(1), pages 51-89, March.
- Catherine M. Paul & Donald Siegel, 2006. "Corporate social responsibility and economic performance," Journal of Productivity Analysis, Springer, vol. 26(3), pages 207-211, December.
- Catherine J. Morrison-Paul & Donald S. Siegel, 2006. "Corporate Social Responsibility and Economic Performance," Rensselaer Working Papers in Economics 0605, Rensselaer Polytechnic Institute, Department of Economics.
- repec:bla:joares:v:33:y:1995:i:2:p:353-367 is not listed on IDEAS
- Nagy, Albert L. & Neal, Terry L., 2001. "An empirical examination of corporate myopic behavior: a comparison of Japanese and U.S. companies," The International Journal of Accounting, Elsevier, vol. 36(1), pages 91-113, February. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:cte:wbrepe:wb062306. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ana Poveda)
If references are entirely missing, you can add them using this form.