nach oben

Journal of Business Ethics

Erschienen in:

19.09.2014

Corporate Social Responsibility as a Strategic Shield Against Costs of Earnings Management Practices

verfasst von: Jennifer Martínez-Ferrero, Shantanu Banerjee, Isabel María García-Sánchez

Erschienen in: Journal of Business Ethics | Ausgabe 2/2016

Einloggen

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

search-config

KI-gestützte Suche

Aus

Abstract

We highlight how Corporate Social Responsibility (CSR) can be strategically used against the negative perception from earnings management (EM). Using international data, we analyse the effect of CSR and EM on the cost of capital and corporate reputation. Results confirm that CSR strategy is positively valued by investors and other stakeholders. Contrary to EM, CSR has a positive effect on corporate reputation and lowers the cost of capital. In addition, we also find that the favourable effect of CSR on cost of capital is consistently more intense in firms that show signs of EM indicating that the market does not identify when CSR practices are used as a strategy to mask EM. We also demonstrate how institutional factors influence the above relationship.

Vorheriger Artikel Re-thinking Capitalism: What We can Learn from Scholasticism?

Nächster Artikel Impact of Islamic Work Ethics on Organizational Citizenship Behaviors and Knowledge-Sharing Behaviors

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

Nur mit Berechtigung zugänglich

The basis of EM practices has been established by the Agency and the Positive Accounting theories. The conflict of interest arising from the separation between ownership and control (which is the basis of the Agency Theory) and information asymmetry between the two parties creates a vacuum where managers behave discretionarily, do not take into account shareholders’ interests and carry out EM practices. Positive Accounting Theory point out that accounting choice depends on firm characteristics as it is used to help the relationship between the managers and the stakeholders of firms, particularly the investors.

We count the special administrative region of Hong Kong as a separate country to reflect the fact that their corporate environment is different from that of mainland China.

EIRIS is an independent research organization and a leading provider of non-financial information on companies’ environmental, social and ethical policy and practice. It provides comprehensive research on over 3,000 companies globally. It offers consistent, comparable data on over 110 different ESG areas, including board practice, bribery and corruption, managing environmental and climate change impacts, human rights and supply chain labour standards—See more at: http://www.eiris.org/

Arellano, M., & Bond, S. (1991). Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. The Review of Economic Studies, 58(2), 277–297.CrossRef

Baber, W. R., Fairfield, P. M., & Haggard J. A. (1991). The effect of concern about reported income on discretionary spending decisions: The case of research and development. Accounting Review 66(4), 818–829.

Bakan, J. (2005). The corporation: The pathological pursuit of profit and power. Vancouver: Simon and Schuster.

Banerjee, S. B. (2007). Corporate Social Responsibility: The good, the bad and the ugly. Cheltenham: Edward Elgar.CrossRef

Banerjee, S., Dasgupta, S., & Kim, Y. (2008). Buyer-supplier relationships and the stakeholder theory of capital structure. Journal of Finance, 63, 2507–2552.CrossRef

Barnett, M. L. (2007). Stakeholder influence capacity and the variability of financial returns to Corporate Social Responsibility. The Academy of Management Review, 32(3), 794–816.CrossRef

Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17, 99–120.CrossRef

Barton, J. (2001). Does the use of financial derivatives affect earnings management decisions? The Accounting Review, 76(1), 1–26.CrossRef

Basu, K., & Palazzo, (2008). Corporate Social Responsibility: A process model of sense making. Academy of Management Review, 33(1), 122–136.CrossRef

Bhattacharya, U., Daouk, H., & Welker, M. (2003). The world price of earnings opacity. Accounting Review, 78, 641–678.CrossRef

Blanco, B., García, J. M., & Tribó, J. A. (2009). The complementary between segment disclosure and earnings quality, and its effect on cost of capital. In 32 nd Annual Congress of the European Accounting Association.

Botosan, C. A. (2006). Disclosure and the cost of capital: What do we know? (pp. 31–40). International Accounting Policy Forum: Accounting and Business Research.

Botosan, C. A., & Plumlee, M. A. (2005). Assessing alternative proxies for the expected risk premium. The Accounting Review, 80, 21–53.CrossRef

Brammer, S. J., Brooks, C., & Pavelin, S. (2006). Corporate social performance and stock returns: UK evidence from disaggregate measures. Financial Management, 35, 97–116.CrossRef

Brammer, S., & Pavelin, S. (2004). Building a good reputation. European Management Journal, 22(6), 704–713.CrossRef

Branco, M. C., & Rodrigues, L. L. (2006). Corporate Social Responsibility and resource-based perspectives. Journal of Business Ethics, 69, 111–132.CrossRef

Buhr, N., Gray, R., & Milne, M. J. (2014). Histories, rationales and future prospects for sustainability reporting. In J. Unerman, J. Bebbington, & B. O’Dwyer (Eds.), Sustainability accounting and accountability (Chapter 4) (2nd ed.). Abingdon: Routledge.

Carroll, A. B. (1979). A three-dimensional conceptual model of corporate performance. Academy of Management Review, 4(4), 497–505.

Cespa, G., & Cestone, G. (2007). Corporate Social Responsibility and managerial entrenchment. Journal of Economics & Management Strategy, 16(3), 741–771.CrossRef

Chatterji, A. K., Durand, R., Levine, D., & Touboul, S. (2014). Do ratings of firms converge? Implications for strategy research. IRLE Working Paper No. 107-14.

Chatterji, A. K., Levine, D. I., & Toffel, M. W. (2009). How well do social ratings actually measure Corporate Social Responsibility? Journal of Economics & Management Strategy, 18(1), 125–169.CrossRef

Chen, S., & Bouvian, P. (2009). Is corporate social responsibilty converging? A comparison of Corporate Social Responsibility reporting in the USA, UK, Australia and Germany. Journal of Business Ethics, 87, 299–317.CrossRef

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.CrossRef

Dam, L., & Scholtens, B. (2012). Ownership concentration and CSR policy of European Multinational Enterprises. Journal of Business Ethics, 110, 1–10.CrossRef

de Miguel, A., Pindado, J., & de la Torre, C. (2005). How do entrenchment and expropriation phenomena affect control mechanisms? Corporate Governance: An International Review, 13, 505–516.CrossRef

Dechow, P. M., & R. G. Sloan. (1991). Executive incentives and the horizon problem: An empirical investigation. Journal of Accounting and Economics, 14(1), 51–89.

Dechow, P. M., Sloan, R. G., & Sweeney, A. P. (1995). Detecting earnings management. Accounting Review, 70(2), 193–225.

Delmas, M., Etzion, D., & Nairn-Birch, N. (2013). Triangulating environmental performance: What do Corporate Social Responsibility ratings really capture? The Academy of Management Perspectives, 27, 255–267.CrossRef

Dhaliwal, D., Li, O., Tsang, A., & Yang, Y. (2011). Voluntary non-financial disclosure and the cost of equity capital: The initiation of Corporate Social Responsibility reporting. The Accounting Review, 86(1), 59–100.CrossRef

Donaldson, T., & Preston, L. E. (1995). The stakeholder theory of the corporation: Concepts, evidence and implications. Academy of Management Review, 20, 65–91.

Easton, P. D. (2004). PE ratios, PEG ratios, and estimating the implied expected rate of return on equity capital. The Accounting Review, 79(1), 73–95.

El Ghoul, S., Guedhami, O., Kwok, C. C. Y., & Mishra, D. (2011). Does corporate social responsibility affect the cost of capital? Journal of Banking & Finance, 35(9), 2388–24060.CrossRef

Entine, J. (2003). The myth of social investing. Organization & Environment, 16(3), 352–368.CrossRef

Fabrizi, M., Mallin, C., & Michelon, G. (2013). The role of CEO’s personal incentives in driving Corporate Social Responsibility. Journal of Business Ethics, 26, 1–16.

Ferrer, A., & Quintanilla, J. (1998). Multinationals, national identity, and the management of HRM: Anglo-Saxonisation and its limits. International Journal of Human Resource Management, 9(4), 710–731.CrossRef

Fombrun, C. (1996). Reputation: Realising value from the corporate image. Harvard, MA: Harvard Business School Press.

Fombrun, C. J., Gardberg, N. A., & Barnett, M. L. (2000). Opportunity platforms and safety nets: Corporate citizenship and reputational risk. Business and Society Review, 105(1), 85–106.CrossRef

Fombrun, C., & Shanley, M. (1990). What´s the name? Reputation building and corporate strategy. Academy of Management Journal, 33, 233–258.CrossRef

Francis, J., Huang, A. H., Rajgopal, S., & Zang, A. (2008a). CEO reputation and earnings quality. Contemporary Accounting Research, 25(1), 109–147.CrossRef

Francis, J., LaFond, R., Olsson, P., & Schipper, K. (2004). Costs of equity and earnings attributes. The Accounting Review, 79(4), 967–1000.CrossRef

Francis, J., LaFond, R., Olsson, P., & Schipper, K. (2005). The market pricing of accruals quality. Journal of Accounting and Economics, 39, 295–327.CrossRef

Francis, J., Nanda, D. J., & Olsson, P. (2008b). Voluntary disclosure, earnings quality, and costs of capital. Journal of Accounting Research, 46, 53–99.CrossRef

Gargouri, R. M., Shabou, R., & Francoeur, C. (2010). The relationship between corporate social performance and earnings management. Canadian Journal of Administrative Sciences/Revue Canadienne Des Sciences De l’Administration, 27(4), 320–334.CrossRef

Gray, R. (2006). Social, environmental and sustainability reporting and organisational value creation? Whose value? Whose creation? Accounting, Auditing & Accountability Journal, 19(6), 793–819.CrossRef

Gray, P., Koh, P., & Tong, Y. (2009). Accruals quality, information risk and cost of capital: Evidence from Australia. Journal of Business Finance and Accounting, 36, 51–72.CrossRef

Gray, R. H., Kouhy, R., & Lavers, S. (1995). Methodological themes: Constructing a research database of social and environmental reporting by UK companies. Accounting, Auditing and Accountability Journal, 8(2), 78–101.CrossRef

Gregory, A, Tharyan, R., & Whittaker, J. (2011). Corporate Social Responsibility and the valuation of firms. *Xfi Centre for Finance and Investment, University of Exeter.

Haigh, M. (2006). Camouflage play: Making moral claims in managed investments. Accounting Forum, 30(3), 267–283.CrossRef

Hail, L., & Leuz, C. (2006). International differences in cost of equity capital: Do legal institutions an securities regulations matter? Journal of Accounting Research, 44, 485–531.CrossRef

Handelman, J. M., & Arnold, S. J. (1999). The role of marketing actions with a social dimension: Appeals to the institutional environment. Journal of Marketing, 63(3), 33–48.CrossRef

Haw, I., Hu, B., Hwang, L., & Wu, W. (2004). Ultimate ownership, income management, and legal and extra-legal institutions. Journal of Accounting Research, 42(2), 423–462.CrossRef

Hawken, P. (2004). Socially responsible investing. How the SRI industry has failed to respond to people who want to invest with conscience and what can be done to change it. Natural Capital Institute, Sausalito.

Healy, P., & Wahlen, J. (1999). A review of the earnings management literature and its implications for standard setting. Paper prepared for discussion at the 1998 AAA/FASB Financial Reporting Issues Conference. Accounting Horizons, 13, 365–383.CrossRef

Hillier, D., Pindado, J., de Queiroz, V., & de la Torre, C. (2011). The impact of country-level corporate governance on research and development. Journal of International Business Studies, 50(1), 76–98.

Hong, Y., & Andersen, M. L. (2011). The relationship between Corporate Social Responsibility and earnings management: An exploratory study. Journal of Business Ethics, 104(4), 461–471.CrossRef

Jones, J. J. (1991). Earnings management during import relief investigations. Journal of Accounting Research, 29(2), 193–228.

Kolk, A., & Perego, P. (2008). Determinants of the adoption of sustainability assurance statements: An international investigation. Business Strategy and the Environment, 19(3), 182–198.

La Porta, R., Lopez-de-Silane, F., & Shleifer, A. (1999). Corporate ownership around the world. Journal of Finance, 54, 471–517.CrossRef

La Porta, R., Lopez-de-Silane, F., Shleifer, A., & Vishny, R. W. (1998). Law and finance. Journal of Political Economy, 106(6), 1113–1155.CrossRef

Lai, C., Chiu, C., Yang, C., & Pai, D. (2010). The effects of Corporate Social Responsibility on brand performance: The mediating effect of industrial brand equity and corporate reputation. Journal of Business Ethics, 95(3), 457–469.CrossRef

Lambert, R., Leuz, C., & Verrecchia, R. (2007). Accounting information, disclosure, and the cost of capital. Journal of Accounting Research, 45, 385–420.CrossRef

Leuz, C., Nanda, D., & Wysocki, P. D. (2003). Earnings management and investor protection: An international comparison. Journal of Financial Economics, 69(3), 505–527.CrossRef

Louche, C., Arenas, D., & van Cranenburgh, K. C. (2012). From preaching to investing: Attitudes of religious organisations towards responsible investment. Journal of Business Ethics, 110(3), 301–320.CrossRef

Marginson, P., & Sisson, K. (1994). The structure of transnational capital in Europe: The emerging Euro-company and its implications for industrial relations. In R. Hyman & A. Ferner (Eds.), New frontiers in European industrial relations. Oxford: Blackwell.

McWilliams, A., & Siegel, D. S. (2001). Corporate Social Responsibility: A theory of the firma perspective. Academy of Management Review, 26(1), 117–127.

Melo, T., & Garrido-Morgado, A. (2012). Corporate reputation: A combination of social responsibility and industry. Corporate Social Responsibility and Environment Management, 19, 11–31.CrossRef

Milne, M. J. (2013). Phantasmagoria, sustain-a-babbling and the communication of corporate social and environmental accountability. In R. Craig & J. Davison (Eds.), The Routledge companion to accounting communication (Chapter 14). Abingdon: Routledge.

Milne, M. J., & Gray, R. (2013). W(h)ither ecology? The triple bottom line, the global reporting initiative, and corporate sustainability reporting. Journal of business ethics, 118(1), 13–29.

Ogaki, M. (1993). 17 Generalized method of moments. Econometric applications, Handbook of Statistics, Elsevier, 11, 455–488.

Ohlson, J., & Juettner-Nauroth, B. (2003). Expected EPS and EPS growth as determinants of value. Working paper, New York University.

Park, Y. W., & Shin, H. H. (2004). Board composition and earnings management in Canada. Journal of Corporate Finance, 10(3), 431–457.

Post, J. E., Preston, L., & Sachs, S. (2002). Managing the extended enterprise: The new stakeholder view. California Management Review, 45(1), 6–29.CrossRef

Prado-Lorenzo, J. M., & Garcia-Sanchez, I. M. (2010). The role of the board of directors in disseminating relevant information on greenhouse gases. Journal of Business Ethics, 97(3), 391–424.CrossRef

Prado-Lorenzo, J. M., García-Sánchez, I. M., & Gallego-Álvarez, I. (2012). Effects of activist shareholding on Corporate Social Responsibility reporting practices: An empirical study in Spain. Journal of Economics, Finance and Administrative Science, 17(32), 7–16.

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.CrossRef

Roychowdhury, S. (2006). Earnings management through real activities manipulation. Journal of Accounting and Economics, 42(3), 335–370.CrossRef

Scholtens, B., & Dam, L. (2007). Cultural values and international differences in business ethics. Journal of Business Ethics, 75(3), 273–284.CrossRef

Scholtens, B., & Kang, F. C. (2012). Corporate Social Responsibility and earnings management: Evidence from Asian economies. Corporate Social Responsibility and Environmental Management. Article first published online 9-03-2012. doi:10.1002/csr.1286.

Sen, S., & Bhattacharya, C. B. (2001). Does doing good always lead to doing better? Consumer reactions to Corporate Social Responsibility. Journal of Marketing Research, 38, 25–243.CrossRef

Sen, S., Bhattacharya, C. B., & Korschun, D. (2006). The role of Corporate Social Responsibility in strengthening multiple stakeholder relationships: A field experiment. Journal of the Academy of Marketing Science, 34(2), 158–166.CrossRef

Shleifer, A., & Vishny, R. W. (1997). A survey of corporate governance. The Journal of Finance, 52(2), 737–783.CrossRef

Simnett, R., Vanstraelen, A., & Chua, W. F. (2009). Assurance on sustainability reports: An international comparison. The Accounting Review, 84(3), 937–967.CrossRef

Surroca, J., Tribó, J. A., & Waddock, S. (2010). Corporate responsibility and financial performance: the role of intangible resources. Strategic Management Journal, 31(5), 463–490.CrossRef

Titman, S. (1984). The effect of capital structure on a firm’s liquidation decision. Journal of Financial Economics, 3(1), 137–151.CrossRef

Torres, A., Bujmolt, T., Tribó, J., & Verhoel, P. (2012). Generating global brand equity through Corporate Social Responsibility to key stakeholders. International Journal of Research in Marketing, 29(1), 13–24.CrossRef

Van Tulder, R., & Van der Zwart, A. (2006). International business-society management: Linking corporate responsibility and globalization. Routledge: Psychology Press.

Williams, R. J., & Barrett, J. D. (2000). Corporate philanthropy, criminal activity, and firm reputation: Is there a link. Journal of Business Ethics, 26, 341–350.CrossRef

Williams, M. S., & Wern Pei, C. H. (1999). Corporate social disclosures by listed companies on their web sites: An international comparison. The International Journal of Accounting, 34(3), 389–419.CrossRef

Wooldridge, J. M. (2010). Econometric analysis of cross section and panel data (2nd ed.). Cambridge: MIT Press.

Zahra, S. A., Priem, R. L., & Rasheed, A. A. (2005). The antecedents and consequences of top management fraud. Journal of Management, 31(6), 803–828.CrossRef

Titel: Corporate Social Responsibility as a Strategic Shield Against Costs of Earnings Management Practices
verfasst von: Jennifer Martínez-Ferrero
Shantanu Banerjee
Isabel María García-Sánchez
Publikationsdatum: 19.09.2014
Verlag: Springer Netherlands
Erschienen in: Journal of Business Ethics / Ausgabe 2/2016
Print ISSN: 0167-4544
Elektronische ISSN: 1573-0697
DOI: https://doi.org/10.1007/s10551-014-2399-x

Springer Professional

Abstract

Bitte loggen Sie sich ein, um Zugang zu Ihrer Lizenz zu erhalten.

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

Springer Professional "Wirtschaft+Technik"

Springer Professional "Wirtschaft"

Weitere Artikel der Ausgabe 2/2016

Local Institutions, Audit Quality, and Corporate Scandals of US-Listed Foreign Firms

When CEO Career Horizon Problems Matter for Corporate Social Responsibility: The Moderating Roles of Industry-Level Discretion and Blockholder Ownership

Applying Behavioural Theory to the Challenge of Sustainable Development: Using Hairdressers as Diffusers of More Sustainable Hair-Care Practices

The Sustainability Balanced Scorecard: A Systematic Review of Architectures

Impact of Islamic Work Ethics on Organizational Citizenship Behaviors and Knowledge-Sharing Behaviors

Entrepreneurial Orientation and Corruption