Abstract
Research on the impact of corporate social responsibility (CSR) performance to the financial performance have been widely studied previously. However, there were a few studies investigate the effect of CSR on accrual quality which is one of the attributes of earning quality. The aim of this study is to examine the affect of CSR toward accrual quality in the context of Indonesia, where the empirical results of the benefits of CSR implementatation are still scant.Research samples are all listed companies in Indonesia Stock Exchange (IDX) in miscellaneous industry sector for period 2009 to 2013. There are 92 firm years included in this study. CSR is measured by scoring CSR activities of the firm based on GRI Index guideline version 3.1, whereas attributes of earning quality used in this study is accrual quality. We include two control variables in this research model i.e. firm size and leverage. The results show that CSR performance do not explain the changes in accrual quality. Leverage has no effect on accrual quality as well. On the other hand firm size has a significant effect on CSR performance however the sign of association is contrary with the expected.
Highlights
The failure of several big companies such as Enron Corporation, Arthur Anderson, Lehman Brotthers, and worldCom have diminished public trust (Snider et al, 2003)
corporate social responsibility (CSR) is measured by scoring CSR activities of the firm based on GRI Index guideline version 3.1, whereas attributes of earning quality used in this study is accrual quality
The results show that CSR performance do not explain the changes in accrual quality
Summary
The failure of several big companies such as Enron Corporation, Arthur Anderson, Lehman Brotthers, and worldCom have diminished public trust (Snider et al, 2003). The business disaster including financial scandals have triggered the need of strong corporate social responsibility (CSR). Yoon et al (2006) said that CSR activities can be used to attract consumer social view attention to the firms, to create firms’s brand image and to develop positive relationships with stakeholders as well. According to Hong & Andersen (2011), external stakeholders will rely on financial statement to value amount, timing, and uncertainty of future cash flow. The quality of reported earning has an important role in communication process between firms and its external stakeholders
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