Are socially responsible firms responsible to accounting? A meta-analysis of the relationship between corporate social responsibility and earnings management

Abstract

Purpose This study aims to analyze the relationship between corporate social responsibility (CSR) and quality of accounting report, especially on earnings management (EM). In addition, potential moderators of this relationship are examined. Design/methodology/approach After a comprehensive study of potential mechanisms, the authors obtain plenty of empirical results to open the black box of the link between CSR and EM. Meta-analysis is applied on 51 studies from 35 papers. Further analysis is also carried out to determine the moderating effects, such as the cultural and sample selection differences in these papers. Findings CSR is negatively associated with EM. In addition, this effect is moderated by cultural difference, CSR measurement, and year of sample selection. Research limitations/implications Two patterns of the hypothesis between CSR and EM are confirmed based on agency cost theory, a theoretical shift of corporate ethics based on organizational moral perspective. Several useful suggestions are also provided for future studies on the empirical model and sample selection. Further research is necessary to clarify the agency cost behind the two theoretical patterns. Practical implications CSR is not a tool for firms to market but rather a strategy to ensure their consistency with moral principles, indicating that management should pay more attention to the potential damage of the incongruence between CSR and accounting reporting quality. CSR reporting quality remains an important issue for legislature to guarantee continued firm operations. Originality/value To the best of the authors’ knowledge, this study is the first to analyze the CSR and EM link using a meta-analysis and to consider its underlying mechanism under the global environment. Previous method design and sample selection are reviewed to provide reference for future studies.