Earnings management and corporate social responsibility: UK evidence
2018
Purpose
The paper aims to re-interpret the role of corporate social responsibility (CSR) in limiting the extreme practices in earnings management (EM) by using evidence from large UK companies.
Design/methodology/approach
The study has used content analysis and disclosure index to measure the level of CSR. The authors measured EM based on discretionary accruals by using cross-sectional version of the modified Jones model.
Findings
The findings of this study reveal that companies with a higher commitment to CSR activities are less likely to manage earnings through accruals.
Originality/value
This study shed more light on the potential impact of CSR on earnings management in the context of the UK. Prior research on the impact of CSR on earnings management has used exclusively CSR scores, provided by CSR score indices. The manual measurement used in this study for CSR (disclosure index/content analysis) is considered to provide a more detailed and precise measure.
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