EARNINGS MANAGEMENT AND CORPORATE SOCIAL RESPONSIBILITY
Drawing on stakeholder-agency theory and the earnings management framework, we explore the relationship between discretionary accounting accruals and corporate social responsibility. We hypothesize a positive connection between corporate social responsibility and earnings management. We argue that managers may satisfy the interest of stakeholders as an entrenchment strategy once these managers have followed earnings management practices, thereby damaging the long-term interests of shareholders. Also, we expect that the positive connection between corporate social responsibility and financial performance is negatively moderated when combined with earnings management practices. We empirically demonstrate our theoretical contention making use of a database comprising of 599 firms from 32 different nations for the period 2002-2004.
Year of publication: |
2007-09
|
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Authors: | Prior, Diego ; Surroca, Jordi ; Tribo, Josep A. |
Institutions: | Departamento de Economía de la Empresa, Universidad Carlos III de Madrid |
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