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A Bidirectional Analysis of Earnings Management and Corporate Social Responsibility: The Moderating Effect of Stakeholder and Investor Protection
Author(s) -
MartínezFerrero Jennifer,
GallegoÁlvarez Isabel,
GarcíaSánchez Isabel María
Publication year - 2015
Publication title -
australian accounting review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.551
H-Index - 36
eISSN - 1835-2561
pISSN - 1035-6908
DOI - 10.1111/auar.12075
Subject(s) - accrual , accounting , corporate social responsibility , stakeholder , business , earnings management , investor protection , sample (material) , generalized method of moments , earnings , corporate governance , economics , finance , public relations , political science , panel data , econometrics , management , chemistry , chromatography
The aim of this paper is to analyse the connection and possible bidirectional relationship between corporate social responsibility (CSR) and earnings management (EM). Furthermore, we identify the institutional factors moderating these relationships, such as stakeholder and investor protection. The use of the generalised method of moments estimator proposed by Arellano and Bond (1991) for an international sample of 1960 international listed non‐financial companies from 26 countries for the period 2002 to 2010 highlights the existence of an inverse bidirectional relationship between CSR and EM through discretionary accruals. These relationships are especially important in countries where there is significant institutional pressure regarding CSR as a result of their greater stakeholder protection and also in countries with greater investor protection.