Is earnings quality associated with corporate social responsibility? Evidence from the Korean market

28Citations
Citations of this article
211Readers
Mendeley users who have this article in their library.

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.

Cite

CITATION STYLE

APA

Yoon, B., Kim, B., & Lee, J. H. (2019). Is earnings quality associated with corporate social responsibility? Evidence from the Korean market. Sustainability (Switzerland), 11(15). https://doi.org/10.3390/su11154116

Register to see more suggestions

Mendeley helps you to discover research relevant for your work.

Already have an account?

Save time finding and organizing research with Mendeley

Sign up for free