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The relationship between corporate social responsibility, financial misstatements and SEC enforcement actions
Author(s) -
Tran Nam,
O'Sullivan Don
Publication year - 2020
Publication title -
accounting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.645
H-Index - 49
eISSN - 1467-629X
pISSN - 0810-5391
DOI - 10.1111/acfi.12404
Subject(s) - enforcement , underpinning , corporate social responsibility , business , stakeholder theory , accounting , stakeholder , financial fraud , finance , economics , public relations , law , political science , management , civil engineering , engineering
This study explores the relationship between corporate social responsibility ( CSR ), financial misstatements and SEC enforcement actions. We find that firms with higher CSR are less likely to receive SEC enforcement actions for financial misstatements. Drawing on insights from stakeholder theory and the reputational literature, we identify two channels underpinning this relationship: (i) firms with higher CSR are less likely to engage in financial misstatements and (ii) the reputational effect of CSR reduces the likelihood of SEC enforcement actions. We find empirical evidence consistent with both channels.