Is Earnings Quality Associated with Corporate Social Responsibility? Evidence from the Korean Market

By Bohyun Yoon, Byul Kim, J. Lee. Sustainability, 2019

1,402 citations recorded by the source corpus.

Socially responsible firms are believed to behave in a responsible manner to restrict earnings management and thus deliver more reliable and transparent financial information to investors. We test this hypothesis by predicting a higher quality of financial reporting for socially responsible firms in the Korean market. The entire sample analysis provides evidence for the hypothesis in the use of discretionary accruals as proxy variables for the quality of financial reporting. However, our sub-sample analysis indicates that such weak support is driven by a group of environmentally sensitive firms and the affiliates of large family-owned conglomerates, or chaebol. Socially responsible firms are less likely to be involved with earnings management in the group of non-environmentally sensitive industries and non-chaebol affiliates. These firms provide a better quality of financial reporting in terms of both the use of discretionary accruals and real activity manipulations. In line with recent studies, our findings suggest that ethical concerns in producing high-quality financial reports rely significantly on firm characteristics.

Subfields: Accounting, Marketing, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/ddc446dc83e7461e050c77c9faf6962fdd8bd693

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Citations in the corpus

Country-level institutions, firm value, and the role of corporate social responsibility initiatives (2017, positive): “As CSR increases transparency (Dhaliwal et al., 2011; Gelb & Strawser, 2001; Kim et al., 2012) and reduces short-term opportunism (Bénabou & Tirole, 2010), it improves firm access to financing (Cheng et al.”
Corporate Social Responsibility Report Narratives and Analyst Forecast Accuracy (2017, methodology): “KLD’s CSR performance database is used widely in the literature (e.g., Hillman and Keim 2001; Chatterji et al. 2009; Dhaliwal et al. 2011; Kim et al. 2012). based CSR disclosure score continues to have a significant and positive association with analyst forecast accuracy after controlling for these…”
CSR disclosure and financial performance revisited: A cross-country analysis (2018, methodology): “…assurance provider has been engaged, we used a dummy variable to differentiate between a Big4 audit firm9 and other types of assurance providers (Kim et al., 2012; KPMG, 2013, 2015) We hypothesise that organisations that engage an audit firm to provide CSR assurance will have a higher level of…”