Corporate social responsibility: opportunistic behavior under earnings management?

ABSTRACT

This paper investigates whether companies actively use social responsibility to divert public attention from the quality of their accounting information when implementing earnings management. The results show a significant positive relationship between EM and CSR. The mechanism of influence suggests that the risk of share price collapse, investor sentiment and the cost of capital play a mediating role. Subgroup tests reveal that this corporate masking and rent-seeking motive is more pronounced in underperforming, non-family-owned and non-state owned firms. Further research finds that corporate governance mechanisms such as equity incentives, fund ownership, and high concentration of equity can moderate this opportunism.

KEYWORDS:

• Opportunistic behavior
• earnings management
• corporate social responsibility
• corporate governance mechanism

Disclosure statement

No potential conflict of interest was reported by the authors.

Data availability statement

The data that support the findings of this study are available in CSMAR Database (https://cn.gtadata.com/),and Hexun.com(https://www.hexun.com/).

Additional information

Funding

This work was supported by The Tianjin Graduate Scientific Research Innovation Research Project under Grant 2021YJSB066; Central Universities Basic Scientific Research Business Fund Special Fund Grant Project under Grant 2019FR005