Corporate social responsibility and managerial short-termism

Abstract

ABSTRACT This study examines whether corporate social responsibility (CSR) mitigates or exacerbates managerial short-termism. Using earnings management (EM) as a proxy for managerial short-termism, we find that socially responsible firms engage in less accrual-based and real EM activities. This finding supports the argument that socially responsible firms not only focus on current profits but also maintain long-term sustainable development. Further analyses reveal that the moderate effect of CSR on managerial short-termism is evident only for mandatory CSR disclosure firms. This suggests that regulatory non-financial reporting potentially mitigates information asymmetry and effectively constrains managerial short-termism.