Is Earnings Quality Associated with Corporate Social Responsibility? Evidence from the Korean Market
Year: 2019
Type: article
Abstract: 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.
Source: Sustainability
DOI: 10.3390/su11154116
Authors: Bohyun Yoon, Byul Kim, Jeong Hwan Lee
Institutions: Kangwon National University, Hanyang University
Language: English
Subfield: Accounting
Domain: Social Sciences
Open Access status: gold
Estimated APC paid: $1,722
OpenAlex ID: W2965801708