Corporate Social Performance, Financial Performance for Firms that Restate Earnings

This study examines corporate social performance (CSP) in firms that restate their financialstatements and, using a match pair design, compares their performance to firms that do notrestate their financial statements. Utilizing a randomized block design (two years prior to therestatement and two years after the restatement) for a sample of 44 U.S. firms, we found thatCSP Strengths, CSP Weaknesses, CSP People Strengths, and CSP People Weaknesses all increasedafter restatement though weaknesses increased at a greater rate than strengths. Additionally,using panel data and a match pair design we found, we found that restating firms hada greater increase in CSP Strengths, CSP Weaknesses, CSP Product Strengths, CSP PeopleStrengths and a greater decrease in Total CSP People than non-restating firms after the restatementperiod. When comparing the relationships between CSP and financial performance (FP),we found that the positive relationship between ROA and CSP Strengths is greater for restatementfirms than non-restating firms. In particular, we find that this positive relationship is aresult of the People dimension of CSP, in particular CSP People Strengths. Copyright © www.iiste.org