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Corporate Social Responsibility and Earnings Management: Evidence from Asian Economies
Author(s) -
Scholtens Bert,
Kang FengChing
Publication year - 2012
Publication title -
corporate social responsibility and environmental management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.519
H-Index - 73
eISSN - 1535-3966
pISSN - 1535-3958
DOI - 10.1002/csr.1286
Subject(s) - earnings management , corporate social responsibility , investor protection , business , earnings , accounting , finance , corporate governance , public relations , political science
We investigate how earnings management is associated with corporate social responsibility (CSR) and investor protection with 139 firms in ten Asian countries. In Asia, CSR is increasingly attracting attention but the legal system generally is perceived as being poor. We hypothesize that there is an inverse relationship between CSR and earnings management, as well as between investor protection and earnings management. Regarding earnings management, we investigate earnings smoothing and earnings aggressiveness. We find that Asian firms with relatively good CSR are engaged significantly less with earnings management. Investor protection also is negatively associated with earnings management. We find that this is very case sensitive and depends on the ways in which earnings management and investor protection are actually measured. In addition, we establish that CSR shows positive interaction with investor protection. We conclude that in Asian countries CSR moderates firms’ earnings management and that this is conditioned by the legal system. Copyright © 2012 John Wiley & Sons, Ltd and ERP Environment.