Skip to main content
Fachgebiete
Automobil + Motoren Bauwesen + Immobilien Business IT + Informatik Elektrotechnik + Elektronik Energie + Nachhaltigkeit Finance + Banking Management + Führung Marketing + Vertrieb Maschinenbau + Werkstoffe Versicherung + Risiko
DE
EN
Bücher
Zeitschriften
Themenseiten
Organisationspsychologie Projektmanagement Marketing Smart Manufacturing
Weitere Formate
Podcasts Webinare Technik Webinare Wirtschaft Kongresse Veranstaltungskalender Awards
Jetzt Einzelzugang starten
Zugang für Unternehmen
Referenzkunden
SLX-Digitalkonferenz: Zukunftswerkstatt 2024

Mehr Umsatz mit Top-Kontakten

Am 7. Mai erfahren Sie, wie Vertriebsteams Leadgenerierung, Leadnurturing und Leadstrategien effizient steuern können.
Erweiterte Suche
Anmelden
nach oben
Journal of Business Ethics
Erschienen in: Journal of Business Ethics 3/2021

20.12.2019 | Original Paper

Corporate Social Responsibility and Financial Fraud: The Moderating Effects of Governance and Religiosity

verfasst von: Xing Li, Jeong-Bon Kim, Haibin Wu, Yangxin Yu

Erschienen in: Journal of Business Ethics | Ausgabe 3/2021

Einloggen

Aktivieren Sie unsere intelligente Suche, um passende Fachinhalte oder Patente zu finden.

search-config
loading …

Abstract

This study investigates how managers in firms that have committed fraud strategically use socially responsible activities in coordination with their fraudulent financial reporting practices. Using propensity score matching to select control firms that have a similar probability of fraud in the pre-fraud benchmark period, we find that the corporate social responsibility (CSR) performance of fraudulent firms in the fraud-committing period is significantly higher compared with the CSR performance of non-fraudulent control firms during this period, and compared with that during their own pre-fraud benchmark periods. This higher CSR performance by fraudulent firms is achieved by means of investing in both stakeholder and third-party CSR categories and by improving in CSR strengths. Furthermore, the increase in CSR performance is more pronounced for fraudulent firms with a weak governance environment, and for firms located in high-religiosity states. Overall, our findings suggest that fraudulent firms strategically adjust their CSR performance to coordinate with their fraudulent financial activities.
Vorheriger Artikel Are Politically Endorsed Firms More Socially Responsible? Selective Engagement in Corporate Social Responsibility
Nächster Artikel The Carrot or the Stick: Self-Regulation for Gender-Diverse Boards via Codes of Good Governance

Sie haben noch keine Lizenz? Dann Informieren Sie sich jetzt über unsere Produkte:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

  • über 102.000 Bücher
  • über 537 Zeitschriften

aus folgenden Fachgebieten:

  • Automobil + Motoren
  • Bauwesen + Immobilien
  • Business IT + Informatik
  • Elektrotechnik + Elektronik
  • Energie + Nachhaltigkeit
  • Finance + Banking
  • Management + Führung
  • Marketing + Vertrieb
  • Maschinenbau + Werkstoffe
  • Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Jetzt informieren

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

  • über 67.000 Bücher
  • über 340 Zeitschriften

aus folgenden Fachgebieten:

  • Bauwesen + Immobilien
  • Business IT + Informatik
  • Finance + Banking
  • Management + Führung
  • Marketing + Vertrieb
  • Versicherung + Risiko




Jetzt Wissensvorsprung sichern!

Jetzt informieren
Anhänge
Nur mit Berechtigung zugänglich
Fußnoten
1
While studies such as that of Kim et al. (2012) show that CSR-engaged firms are less likely to be subject to SEC enforcement actions, a positive relationship between fraud and CSR performance before the public discovery of fraud, if observed, would not necessarily be in conflict with these studies. Because regulatory enforcement actions by the SEC occur after the fraud is detected, whereas our study focuses on CSR performance during the period in which fraud is being committed. Furthermore, the lower likelihood of the SEC’s regulatory enforcement actions for CSR firms may be exactly due to these firms’ improvement in CSR during the fraud-committing period.
 
2
Audit Analytics data is only available to us up to 2014; thus, we supplement the years 2015–2016 using the Stanford Securities Class Action Clearinghouse database.
 
3
MSCI STATS is the successor to Kinder, Lydenberg & Domini (KLD), Innovest, and the Investor Responsibility Research Center (IRRC).
 
4
The coverage of the Audit Analytics Corporate and Legal database starts in 1960. However, there are fewer than 100 cases from 1960 to 1994. Consequently, after the sample selection process, all of our fraud cases are taken from the period from 1995 onwards.
 
5
A major advantage of using the Audit Analytics class action litigation database is that each fraud case has a start date (exposure begin date) and an end date (exposure end date), enabling us to accurately construct the fraud-committing period of each firm.
 
6
The ex ante probability of financial fraud is computed using the following procedure. First, we compute the predicted value using the estimated coefficients of Dechow et al. (2011): Predicted value = − 7.893 + 0.79 × rsst_acc + 2.518 × d_rec + 1.191 × d_inv + 1.979 ×  %soft_at + 0.171 × d_cs – 0.932 × d_roa + 1.029 × issue, where rsst_acc is total accruals; d_rec, d_inv, d_cs, and d_roa are changes in receivables, inventory, cash sales, and return on assets (ROA), respectively; %soft_at is the percentage of soft assets; and issue is a dummy variable that equals 1 if a firm issues equity or debt and 0 otherwise. Next, the ex ante predicted probability of financial fraud is computed as p(Fraud) = exp(Predicted_value)/[1 + exp(Predicted_value)].
 
7
For example, in 2010 data there are eight community strengths—charitable giving, innovative giving, support for housing, support for education, non-US charitable giving, volunteer program, community engagement, and other community strengths—and four community concerns—investment controversies, negative economic impact, tax disputes, and other community concerns.
 
8
For example, the maximum possible number of environmental concerns was six in the period from 1991 to 1998, increasing to seven in 1999.
 
9
For example, the community CSR score is defined as the number of community strengths divided by the maximum number of community strengths minus the number of community concerns divided by the maximum number of community concerns, and possible values range between − 1 and 1.
 
10
Our results are not affected if we define Leverage as the ratio of long-term debt (item 9) plus debt in current liabilities (item 34) to total assets.
 
11
The definition of these variables can be found in “Appendix 1”.
 
12
We also include the model-based measures of EM in our main regressions as additional control variables, and our results remain unchanged.
 
13
As a robustness check, we also investigate the association between corporate within-GAPP earnings management and CSR performance. The (untabulated) results show that corporate CSR performance is positively associated with its previous earnings management activities (both accrual-based and real earnings management).
 
14
The Bebchuk E-index is provided up to 2006; we thus construct the index for more recent years using the method proposed by Bebchuk et al. (2009).
 
15
Our results are not affected if we also include the interaction of Entrenchment with the Fraud and During dummies—that is, Fraud × Entrenchment and During × Entrenchment.
 
16
Our results are not affected by the inclusion of the interaction of Religiosity with the Fraud and During dummies—that is, Fraud × Religiosity and During × Religiosity.
 
17
Note that we define Fraud_Length as the logged number of months from the fraud start date to the fraud end date.
 
Literatur
Angelidis, J., & Ibrahim, N. (2004). An exploratory study of the impact of degree of religiousness upon an individual’s corporate social responsiveness orientation. Journal of Business Ethics, 51(2), 119–128.
Ball, R., & Shivakumar, L. (2008). Earnings quality at initial public offerings. Journal of Accounting and Economics, 45(2), 324–349.
Barber, B. M., & Lyon, J. D. (1996). Detecting abnormal operating performance: The empirical power and specification of test statistics. Journal of Financial Economics, 41(3), 359–399.
Bargeron, L. L., Lehn, K. M., & Zutter, C. J. (2010). Sarbanes-oxley and corporate risk-taking. Journal of Accounting and Economics, 49(1), 34–52.
Bebchuk, L., Cohen, A., & Ferrell, A. (2009). What matters in corporate governance? The Review of Financial Studies, 22(2), 783–827.
Bradley, R. L., Jr. (2009). Corporate social responsibility and energy. Culture and civilization, 1, 181–197.
Chen, T., Dong, H., & Lin, C. (2019). Institutional shareholders and corporate social responsibility. Journal of Financial Economics (forthcoming).
Chih, H.-L., Shen, C.-H., & Kang, F.-C. (2008). Corporate social responsibility, investor protection, and earnings management: Some international evidence. Journal of Business Ethics, 79(1), 179–198.
Cochran, J. K., & Akers, R. L. (1989). Beyond hellfire: An exploration of the variable effects of religiosity on adolescent marijuana and alcohol use. Journal of Research in Crime and Delinquency, 26(3), 198–225.
Cohen, D. A., Dey, A., & Lys, T. Z. (2008). Real and accrual-based earnings management in the pre- and post-sarbanes-oxley periods. The Accounting Review, 83(3), 757–787.
Cohen, J., Krishnamoorthy, G., & Wright, A. (2010). Corporate governance in the post-sarbanes-oxley era: Auditors’ experiences*. Contemporary Accounting Research, 27(3), 751–786.
Costello, A. M., & Wittenberg-Moerman, R. (2011). The impact of financial reporting quality on debt contracting: Evidence from internal control weakness reports. Journal of Accounting Research, 49(1), 97–136.
Dechow, P. M., Ge, W., Larson, C. R., & Sloan, R. G. (2011). Predicting material accounting misstatements. Contemporary Accounting Research, 28(1), 17–82.
Dechow, P. M., & Sloan, R. G. (1995). Detecting earnings management. The Accounting Review, 70(2), 193–225.
Deng, X., Kang, J.-K., & Low, B. S. (2013). Corporate social responsibility and stakeholder value maximization: Evidence from mergers. Journal of Financial Economics, 110(1), 87–109.
Dhaliwal, D. S., Oliver Zhen, L., Tsang, A., & Yong George, Y. (2011). Voluntary nonfinancial disclosure and the cost of equity capital: The initiation of corporate social responsibility reporting. The Accounting Review, 86(1), 59–100.
Dhaliwal, D. S., Radhakrishnan, S., Tsang, A., & Yong George, Y. (2012). Nonfinancial disclosure and analyst forecast accuracy: International evidence on corporate social responsibility disclosure. The Accounting Review, 87(3), 723–759.
Di Giuli, A., & Kostovetsky, L. (2014). Are red or blue companies more likely to go green? Politics and corporate social responsibility. Journal of Financial Economics, 111(1), 158–180.
Diaz, J. D. (2000). Religion and gambling in sin-city: A statistical analysis of the relationship between religion and gambling patterns in las vegas residents. The Social Science Journal, 37(3), 453–458.
Dong, H., Chen, L., & Zhan, X. (2015). Do analysts curb corporate irresponsibility? Evidence from natural experiments. Working Paper.
Dupire, M., & M’Zali, B. (2018). CSR strategies in response to competitive pressures. Journal of Business Ethics, 148(3), 603–623.
Dyck, A., Morse, A., & Zingales, L. (2010). Who blows the whistle on corporate fraud? The Journal of Finance, 65(6), 2213–2253.
Erickson, M., Hanlon, M., & Maydew, E. L. (2004). How much will firms pay for earnings that do not exist? Evidence of taxes paid on allegedly fraudulent earnings. The Accounting Review, 79(2), 387–408.
Evans, T. D., Cullen, F. T., Dunaway, R. G., & Burton, V. S., Jr. (1995). Religion and crime reexamined: The impact of religion, secular controls, and social ecology on adult criminality*. Criminology, 33(2), 195–224.
Feng, M., Ge, W., Luo, S., & Shevlin, T. (2011). Why Do CFOs become involved in material accounting manipulations? Journal of Accounting and Economics, 51(1–2), 21–36.
Ferrell, A., Liang, H., & Renneboog, L. (2016). Socially responsible firms. Journal of Financial Economics, 122(3), 585–606.
Flammer, C. (2015a). Does corporate social responsibility lead to superior financial performance? A regression discontinuity approach. Management Science, 61(11), 2549–2568.
Flammer, C. (2015b). Does product market competition foster corporate social responsibility? Evidence from trade liberalization. Strategic Management Journal, 36(10), 1469–1485.
Flammer, C. (2017). Competing for government procurement contracts: The role of corporate social responsibility. Strategic Management Journal, 39(5), 1299–1324.
Flammer, C., & Luo, J. (2017). Corporate social responsibility as an employee governance tool: Evidence from a quasi-experiment. Strategic Management Journal, 38(2), 163–183.
Freeman, R. E. (1984). Strategic management: A stakeholder approach. Cambridge: Cambridge University Press.
Friedman, M. (1962). Capitalism and freedom. Chicago: University of Chicago Press.
Gao, F., Lisic, L. L., & Zhang, I. X. (2014). Commitment to social good and insider trading. Journal of Accounting and Economics, 57(2–3), 149–175.
Gompers, P., Ishii, J., & Metrick, A. (2003). Corporate governance and equity price. The Quarterly Journal of Economics, 118(1), 107.
Harford, J., Humphery-Jenner, M., & Powell, R. (2012). The sources of value destruction in acquisitions by entrenched managers. Journal of Financial Economics, 106(2), 247–261.
Hemingway, C. A., & Maclagan, P. W. (2004). Managers’ personal values as drivers of corporate social responsibility. Journal of Business Ethics, 50(1), 33–44.
Hilary, G., & Hui, K. W. (2009). Does religion matter in corporate decision making in America? Journal of Financial Economics, 93(3), 455–473.
Hoi, C. K., Wu, Q., & Zhang, H. (2013). Is corporate social responsibility (CSR) associated with tax avoidance? Evidence from irresponsible CSR activities. The Accounting Review, 88(6), 2025–2059.
Hribar, P., & Collins, D. W. (2002). Errors in estimating accruals: Implications for empirical research. Journal of Accounting Research, 40(1), 105–134.
Hribar, P., & Craig Nichols, D. (2007). The use of unsigned earnings quality measures in tests of earnings management. Journal of Accounting Research, 45(5), 1017–1053.
Jiang, Z., & Lie, E. (2016). Cash holding adjustments and managerial entrenchment. Journal of Corporate Finance, 36, 190–205.
Jones, T. M. (1995). Instrumental stakeholder theory: A synthesis of ethics and economics. Academy of Management Review, 20(2), 404–437.
Kedia, S., & Philippon, T. (2009). The economics of fraudulent accounting. The Review of Financial Studies, 22(6), 2169–2199.
Kim, Y., Li, H., & Li, S. (2014). Corporate social responsibility and stock price crash risk. Journal of Banking & Finance, 43, 1–13.
Kim, Y., Park, M. S., & Wier, B. (2012). Is earnings quality associated with corporate social responsibility? The Accounting Review, 87(3), 761–796.
Kothari, S. P., Mizik, N., & Roychowdhury, S. (2016). Managing for the moment: The role of earnings management via real activities versus accruals in SEO valuation. The Accounting Review, 91(2), 559–586.
Lanis, R., & Richardson, G. (2012). Corporate social responsibility and tax aggressiveness: An empirical analysis. Journal of Accounting and Public Policy, 31(1), 86–108.
Lennox, C., Lisowsky, P., & Pittman, J. (2013). Tax aggressiveness and accounting fraud. Journal of Accounting Research, 51(4), 739–778.
Margolis, J. D., Elfenbein, H. A., & Walsh, J. P. (2007). Does it pay to be good? A meta-analysis and redirection of research on the relationship between corporate social and financial performance. Working Paper.
Martínez-Ferrero, J., Banerjee, S., & García-Sánchez, I. M. (2016). Corporate social responsibility as a strategic shield against costs of earnings management practices. Journal of Business Ethics, 133(2), 305–324.
Masulis, R. W., & Reza, S. W. (2015). Agency problems of corporate philanthropy. The Review of Financial Studies, 28(2), 592–636.
McGuire, S. T., Omer, T. C., & Sharp, N. Y. (2012). The impact of religion on financial reporting irregularities. The Accounting Review, 87(2), 645–673.
McNichols, M. F., & Stubben, S. R. (2008). Does earnings management affect firms’ investment decisions? The Accounting Review, 83(6), 1571–1603.
McWilliams, A., Siegel, D. S., & Wright, P. M. (2006). Corporate social responsibility: Strategic implications*. Journal of Management Studies, 43(1), 1–18.
Porter, M., & Kramer, M. (2006). Strategy and society: The link between competitive advantage and corporate social responsibility. Harvard Business Review, 84(12), 78–92.
Prior, D., Surroca, J., & Tribó, J. A. (2008). Are socially responsible managers really ethical? Exploring the relationship between earnings management and corporate social responsibility. Corporate Governance: An International Review, 16(3), 160–177.
Servaes, H., & Tamayo, A. (2013). The Impact of corporate social responsibility on firm value: The role of customer awareness. Management Science, 59(5), 1045–1061.
Tran, N., & O’Sullivan, D. (2018). The relationship between corporate social responsibility, financial misstatements and SEC enforcement actions. Accounting & Finance (forthcoming).
Vinten, G. (2002). The corporate governance lessons of enron. Corporate Governance: The International Journal of Business in Society, 2(4), 4–9.
Weaver, G. R., & Agle, B. R. (2002). Religiosity and ethical behavior in organizations: A symbolic interactionist perspective. Academy of Management Review, 27(1), 77–97.
Weber, M. (1905). The protestant ethic and the spirit of capitalism. London: Routledge.
Metadaten
Titel
Corporate Social Responsibility and Financial Fraud: The Moderating Effects of Governance and Religiosity
verfasst von
Xing Li
Jeong-Bon Kim
Haibin Wu
Yangxin Yu
Publikationsdatum
20.12.2019
Verlag
Springer Netherlands
Erschienen in
Journal of Business Ethics / Ausgabe 3/2021
Print ISSN: 0167-4544
Elektronische ISSN: 1573-0697
DOI
https://doi.org/10.1007/s10551-019-04378-3

Weitere Artikel der Ausgabe 3/2021

Journal of Business Ethics 3/2021 Zur Ausgabe

Original Paper

Not All Followers Socially Learn from Ethical Leaders: The Roles of Followers’ Moral Identity and Leader Identification in the Ethical Leadership Process

Original Paper

A Normative Meaning of Meaningful Work

Original Paper

The Carrot or the Stick: Self-Regulation for Gender-Diverse Boards via Codes of Good Governance

Original Paper

The Effects of Immigration on Labour Tax Avoidance: An Empirical Spatial Analysis

Original Paper

Does It Pay to Invest in Japanese Women? Evidence from the MSCI Japan Empowering Women Index

Original Paper

Does A Trusted Leader Always Behave Better? The Relationship Between Leader Feeling Trusted by Employees and Benevolent and Laissez-Faire Leadership Behaviors