Literature Review on the Association between Earnings Management and Corporate Social Responsibility
Keywords:
Association, Corporate Social Responsibility, Earnings Management, Literature Review.
Abstract
This paper aims to give an overview of the existing literature on the Earnings Management (EM) and Corporate Social Responsibility (CSR) relationship in different countries. This paper reviews preceding studies concerned about EM, CSR and their relationship. Out of 23 works of literature, 11 studies found a negative relationship, 6 studies found a positive relationship, 2 studies found blended relationships in case of different situations and 4 studies found no connection between CSR and EM. Most of the results demonstrated that probably the socially responsible organizations have a negative correlation with EM practice. The types of the relationship depend on cause-effect relationship, information asymmetry, how can a company use resources, awareness on environmental issues, awareness on ethical issues, tax avoidance tendency, corporate governance practice, nature of the firm, political environment, opportunistic incentive, and stakeholder capital, manager's psychology, etc. Relationships between EM and CSR influence on earnings quality, firm performance, and firm value.
References
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Almahrog, Y., Marai, A., & Knezevic, G. (2015). Earnings Management and Its Relations with Corporate Social Responsibility. Facta Universitatis, Series: Economics and Organization, 12(4), 347 - 356.
Almahrog, Y., Aribi, Z. A., & Arun, T. (2018). Earnings management and corporate social responsibility: UK evidence. Journal of Financial Reporting and Accounting. 16(2), 311 – 332.
Alshannag, F., Basah, M. Y., & Khairi, K. F. (2017). The relationship between corporate social responsibility and Corporate financial performance a survey of the literature. International Journal of Business and Administrative Studies, 3(1), 8-14.
Amidu, M., Kwakye, T. O., Harvey, S., & Yorke, S. M. (2016). Do firms manage earnings and avoid tax for corporate social responsibility?. Journal of Accounting and Taxation, 8(2), 11-27.
Anderson, M. C., Hyun, S., & Warsame, H. A. (2014). Corporate social responsibility, earnings management, and firm performance: Evidence from panel VAR estimation. Earnings Management, and Firm Performance: Evidence from Panel VAR Estimation (November 8, 2013).
Basuony, M. A., Elseidi, R. I., & Mohamed, E. K. (2014). The impact of corporate social responsibility on firm performance: Evidence from a MENA country. Corporate Ownership & Control, 12(1-9), 761-774.
Chih, H. L., Shen, C. H., & Kang, F. C. (2008). Corporate social responsibility, investor protection, and earnings management: Some international evidence. Journal of business ethics, 79(1-2), 179-198.
Cho, E., & Chun, S. (2016). Corporate social responsibility, real activities earnings management, and corporate governance: evidence from Korea. Asia-Pacific Journal of Accounting & Economics, 23(4), 400-431.
Choi, H., & Byun, J. (2018). The relationship between corporate social responsibility and earnings management: accounting for endogeneity. Investment Management & Financial Innovations, 15(4), 69-84.
Chun, S., & Cho, E. (2017). Differentiation strategy, CSR, and real activities earnings management: Evidence from Korea. Journal of Applied Business Research (JABR), 33(4), 669-692.
Cohen, D. A., Dey, A., & Lys, T. Z. (2008). Real and accrual-based earnings management in the pre-and post-Sarbanes-Oxley periods. The accounting review, 83(3), 757-787.
Cui, J., Jo, H., & Kim, J. (2016). Earnings Management and Corporate Social Responsibility: International Evidence. Financial Management Association Annual Conference, (pp. 1-51).
Faisal, F., Prasetya, A. R., Chariri, A., & Haryanto, H. (2018). The relationship between corporate social responsibility disclosure and earnings management: is it a complement mechanism or a substitute mechanism? Int. J. Business Governance and Ethics, 13(1), 1–14.
García‐Sánchez, I. M., & García‐Meca, E. (2017). CSR engagement and earnings quality in banks. The moderating role of institutional factors. Corporate Social Responsibility and Environmental Management, 24(2), 145-158.
Gavana, G., Gottardo, P., & Moisello, A. M. (2017). Earnings management and CSR disclosure. Family vs. non-family firms. Sustainability, 9(12), 2327.
Gras-Gil, E., Manzano, M. P., & Fernández, J. H. (2016). Investigating the relationship between corporate social responsibility and earnings management: Evidence from Spain. BRQ Business Research Quarterly, 19(4), 289-299.
Greenfield, A. C., Norman, C. S., & Wier, B. (2008). The effect of ethical orientation and professional commitment on earnings management behavior. Journal of Business Ethics, 83(3), 419-434.
Grougiou, V., Leventis, S., Dedoulis, E., & Owusu-Ansah, S. (2014). Corporate social responsibility and earnings management in US banks. In the Accounting Forum, 38(3), 155-169).
Hamidu, A., Haron, M., & Amran, A. (2015). Corporate social responsibility: A review on definitions, core characteristics and theoretical perspectives. Mediterranean Journal of Social Sciences, 6(4), 83-95.
Hamza, S., & Jarboui, A. (2017). Corporate social responsibility and earnings management within the managerial psychological context. International Journal of Auditing Technology, 3(4), 269-281.
Hong, Y., & Andersen, M. L. (2011). The relationship between corporate social responsibility and earnings management: An exploratory study. Journal of Business Ethics, 104(4), 461-471.
Izadinia, N., Isfahani, A. N., & Nikoo, S. (2014). The Relationship between Earnings Management and Social Responsibility, Emphasizing New Paradigms for Accounting-Profit Companies Listed in Tehran Stock Exchange 2007-2012. International Journal of Academic Research in Business and Social Sciences, 4(1), 600-614.
Kim, Y., Park, M. S., & Wier, B. (2012). Is earnings quality associated with corporate social responsibility?. The accounting review, 87(3), 761-796.
Liu, M., Shi, Y., Wilson, C., & Wu, Z. (2017). Does family involvement explain why corporate social responsibility affects earnings management?. Journal of Business Research, 75, 8-16.
Lo, K. (2008). Earnings management and earnings quality. Journal of Accounting and Economics, 45(2-3), 350-357.
Moir, L. (2001). What do we mean by social corporate responsibility? Corporate Governance, 1(2), 16-22.
Moratis, L., & Egmond, M. v. (2018). Concealing social responsibility? Investigating the relationship between CSR, earnings management and the effect of the industry through quantitative analysis. International Journal of Corporate Social Responsibility, 3(8), 1-13.
Mukhtaruddin, M., Relasari, R., Bambang, B. S., Irman, R., & Abu, K. (2014). Earning management, corporate social responsibility disclosures, and firm? s value: Empirical study on manufacturing listed on IDX period 2010-2012. Net Journal of Business Management, 2(3), 48-56.
Muttakin, M. B., Khan, A., & Azim, M. I. (2015). Corporate social responsibility disclosures and earnings quality. Managerial Auditing Journal, 30(3), 277-298.
Ning, Y. P. (2009). The theoretical framework of earnings management. Canadian Social Science, 1(3), 32-38.
Prior, D., Surroca Aguilar, J., & Tribo Gine, J. A. (2007). Earnings management and corporate social responsibility. 1-42.
Prior, D., Surroca, J., & Tribó, J. A. (2008). Are socially responsible managers really ethical? Exploring the relationship between earnings management and corporate social responsibility. corporate governance: An international review, 16(3), 160-177.
Pyo, G., & Lee, H. Y. (2013). The association between corporate social responsibility activities and earnings quality: Evidence from donations and voluntary issuance of CSR reports. Journal of Applied Business Research (JABR), 29(3), 945-962.
Rahmawati, & Dianita, P. S. (2011). Analysis of the effect of corporate social responsibility on financial performance with earnings management as a moderating variable. Journal of Modern Accounting and Auditing, 7(10), 1034-1045.
Rahmawati, Honggowati, S., & Supriyono, E. (2014). The Effect of Corporate Social Responsibility on Financial Performance with Real Manipulation as a Moderating Variable. International Journal of Management, Economics and Social Sciences, 3(2), 59 –78.
Scholtens, B., & Kang, F. C. (2013). Corporate social responsibility and earnings management: Evidence from Asian economies. Corporate Social Responsibility and Environmental Management, 20(2), 95-112.
Siueia, T. T., & Wang, J. (2019). The association between corporate social responsibility and earnings quality: evidence from extractive industry. Revista de Contabilidad-Spanish Accounting Review, 22(1), 112-121.
Suteja, J., Gunardi, A., & Mirawati, A. (2016). Moderating effect of earnings management on the relationship between corporate social responsibility disclosure and profitability of banks in Indonesia. International Journal of Economics and Financial Issues, 6(4), 1360-1365.
Tandry, A. Y., Setiawati, L., & Setiawan, E. (2014). The effect of CSR disclosure to firm value with earning management as moderating variable: case study of non–financing firms listed at Indonesia Stock Exchange. International Journal of Trade and Global Markets, 7(3), 190-204.
Uyagu, B., & Dabor, A. O. (2017). Earnings Management and Corporate Social Responsibility. The Romanian Economic Journal, 65, 70-87.
Wati, R., Honggowati, S., & Supriyono, E. (2014). The effect of corporate social responsibility on financial performance with real manipulation as a moderating variable. International Journal of Management, Economics and Social Sciences, 3(2), 59-78.
Yip, E., Van Staden, C., & Cahan, S. (2011). Corporate social responsibility reporting and earnings management: The role of political costs. Australasian Accounting, Business and Finance Journal, 5(3), 17-34
Almahrog, Y., Marai, A., & Knezevic, G. (2015). Earnings Management and Its Relations with Corporate Social Responsibility. Facta Universitatis, Series: Economics and Organization, 12(4), 347 - 356.
Almahrog, Y., Aribi, Z. A., & Arun, T. (2018). Earnings management and corporate social responsibility: UK evidence. Journal of Financial Reporting and Accounting. 16(2), 311 – 332.
Alshannag, F., Basah, M. Y., & Khairi, K. F. (2017). The relationship between corporate social responsibility and Corporate financial performance a survey of the literature. International Journal of Business and Administrative Studies, 3(1), 8-14.
Amidu, M., Kwakye, T. O., Harvey, S., & Yorke, S. M. (2016). Do firms manage earnings and avoid tax for corporate social responsibility?. Journal of Accounting and Taxation, 8(2), 11-27.
Anderson, M. C., Hyun, S., & Warsame, H. A. (2014). Corporate social responsibility, earnings management, and firm performance: Evidence from panel VAR estimation. Earnings Management, and Firm Performance: Evidence from Panel VAR Estimation (November 8, 2013).
Basuony, M. A., Elseidi, R. I., & Mohamed, E. K. (2014). The impact of corporate social responsibility on firm performance: Evidence from a MENA country. Corporate Ownership & Control, 12(1-9), 761-774.
Chih, H. L., Shen, C. H., & Kang, F. C. (2008). Corporate social responsibility, investor protection, and earnings management: Some international evidence. Journal of business ethics, 79(1-2), 179-198.
Cho, E., & Chun, S. (2016). Corporate social responsibility, real activities earnings management, and corporate governance: evidence from Korea. Asia-Pacific Journal of Accounting & Economics, 23(4), 400-431.
Choi, H., & Byun, J. (2018). The relationship between corporate social responsibility and earnings management: accounting for endogeneity. Investment Management & Financial Innovations, 15(4), 69-84.
Chun, S., & Cho, E. (2017). Differentiation strategy, CSR, and real activities earnings management: Evidence from Korea. Journal of Applied Business Research (JABR), 33(4), 669-692.
Cohen, D. A., Dey, A., & Lys, T. Z. (2008). Real and accrual-based earnings management in the pre-and post-Sarbanes-Oxley periods. The accounting review, 83(3), 757-787.
Cui, J., Jo, H., & Kim, J. (2016). Earnings Management and Corporate Social Responsibility: International Evidence. Financial Management Association Annual Conference, (pp. 1-51).
Faisal, F., Prasetya, A. R., Chariri, A., & Haryanto, H. (2018). The relationship between corporate social responsibility disclosure and earnings management: is it a complement mechanism or a substitute mechanism? Int. J. Business Governance and Ethics, 13(1), 1–14.
García‐Sánchez, I. M., & García‐Meca, E. (2017). CSR engagement and earnings quality in banks. The moderating role of institutional factors. Corporate Social Responsibility and Environmental Management, 24(2), 145-158.
Gavana, G., Gottardo, P., & Moisello, A. M. (2017). Earnings management and CSR disclosure. Family vs. non-family firms. Sustainability, 9(12), 2327.
Gras-Gil, E., Manzano, M. P., & Fernández, J. H. (2016). Investigating the relationship between corporate social responsibility and earnings management: Evidence from Spain. BRQ Business Research Quarterly, 19(4), 289-299.
Greenfield, A. C., Norman, C. S., & Wier, B. (2008). The effect of ethical orientation and professional commitment on earnings management behavior. Journal of Business Ethics, 83(3), 419-434.
Grougiou, V., Leventis, S., Dedoulis, E., & Owusu-Ansah, S. (2014). Corporate social responsibility and earnings management in US banks. In the Accounting Forum, 38(3), 155-169).
Hamidu, A., Haron, M., & Amran, A. (2015). Corporate social responsibility: A review on definitions, core characteristics and theoretical perspectives. Mediterranean Journal of Social Sciences, 6(4), 83-95.
Hamza, S., & Jarboui, A. (2017). Corporate social responsibility and earnings management within the managerial psychological context. International Journal of Auditing Technology, 3(4), 269-281.
Hong, Y., & Andersen, M. L. (2011). The relationship between corporate social responsibility and earnings management: An exploratory study. Journal of Business Ethics, 104(4), 461-471.
Izadinia, N., Isfahani, A. N., & Nikoo, S. (2014). The Relationship between Earnings Management and Social Responsibility, Emphasizing New Paradigms for Accounting-Profit Companies Listed in Tehran Stock Exchange 2007-2012. International Journal of Academic Research in Business and Social Sciences, 4(1), 600-614.
Kim, Y., Park, M. S., & Wier, B. (2012). Is earnings quality associated with corporate social responsibility?. The accounting review, 87(3), 761-796.
Liu, M., Shi, Y., Wilson, C., & Wu, Z. (2017). Does family involvement explain why corporate social responsibility affects earnings management?. Journal of Business Research, 75, 8-16.
Lo, K. (2008). Earnings management and earnings quality. Journal of Accounting and Economics, 45(2-3), 350-357.
Moir, L. (2001). What do we mean by social corporate responsibility? Corporate Governance, 1(2), 16-22.
Moratis, L., & Egmond, M. v. (2018). Concealing social responsibility? Investigating the relationship between CSR, earnings management and the effect of the industry through quantitative analysis. International Journal of Corporate Social Responsibility, 3(8), 1-13.
Mukhtaruddin, M., Relasari, R., Bambang, B. S., Irman, R., & Abu, K. (2014). Earning management, corporate social responsibility disclosures, and firm? s value: Empirical study on manufacturing listed on IDX period 2010-2012. Net Journal of Business Management, 2(3), 48-56.
Muttakin, M. B., Khan, A., & Azim, M. I. (2015). Corporate social responsibility disclosures and earnings quality. Managerial Auditing Journal, 30(3), 277-298.
Ning, Y. P. (2009). The theoretical framework of earnings management. Canadian Social Science, 1(3), 32-38.
Prior, D., Surroca Aguilar, J., & Tribo Gine, J. A. (2007). Earnings management and corporate social responsibility. 1-42.
Prior, D., Surroca, J., & Tribó, J. A. (2008). Are socially responsible managers really ethical? Exploring the relationship between earnings management and corporate social responsibility. corporate governance: An international review, 16(3), 160-177.
Pyo, G., & Lee, H. Y. (2013). The association between corporate social responsibility activities and earnings quality: Evidence from donations and voluntary issuance of CSR reports. Journal of Applied Business Research (JABR), 29(3), 945-962.
Rahmawati, & Dianita, P. S. (2011). Analysis of the effect of corporate social responsibility on financial performance with earnings management as a moderating variable. Journal of Modern Accounting and Auditing, 7(10), 1034-1045.
Rahmawati, Honggowati, S., & Supriyono, E. (2014). The Effect of Corporate Social Responsibility on Financial Performance with Real Manipulation as a Moderating Variable. International Journal of Management, Economics and Social Sciences, 3(2), 59 –78.
Scholtens, B., & Kang, F. C. (2013). Corporate social responsibility and earnings management: Evidence from Asian economies. Corporate Social Responsibility and Environmental Management, 20(2), 95-112.
Siueia, T. T., & Wang, J. (2019). The association between corporate social responsibility and earnings quality: evidence from extractive industry. Revista de Contabilidad-Spanish Accounting Review, 22(1), 112-121.
Suteja, J., Gunardi, A., & Mirawati, A. (2016). Moderating effect of earnings management on the relationship between corporate social responsibility disclosure and profitability of banks in Indonesia. International Journal of Economics and Financial Issues, 6(4), 1360-1365.
Tandry, A. Y., Setiawati, L., & Setiawan, E. (2014). The effect of CSR disclosure to firm value with earning management as moderating variable: case study of non–financing firms listed at Indonesia Stock Exchange. International Journal of Trade and Global Markets, 7(3), 190-204.
Uyagu, B., & Dabor, A. O. (2017). Earnings Management and Corporate Social Responsibility. The Romanian Economic Journal, 65, 70-87.
Wati, R., Honggowati, S., & Supriyono, E. (2014). The effect of corporate social responsibility on financial performance with real manipulation as a moderating variable. International Journal of Management, Economics and Social Sciences, 3(2), 59-78.
Yip, E., Van Staden, C., & Cahan, S. (2011). Corporate social responsibility reporting and earnings management: The role of political costs. Australasian Accounting, Business and Finance Journal, 5(3), 17-34
Published
2020-02-25
How to Cite
Parvin, R., Sohel Rana, M., & Shams, S. (2020). Literature Review on the Association between Earnings Management and Corporate Social Responsibility. International Journal of Accounting & Finance Review, 5(1), 22-31. https://doi.org/10.46281/ijafr.v5i1.489
Section
Research Paper/Theoretical Paper/Review Paper/Short Communication Paper
Copyright (c) 2020 Ruksana Parvin, Md. Sohel Rana, Shahpar Shams
This work is licensed under a Creative Commons Attribution 4.0 International License.
