The impact of corporate social responsibility on earnings quality in UK listed firms

Abstract

A business committed to CSR activities can establish a favourable reputation in the market hence this reputation can be used to mislead the market by making them rely on the financial reporting of the organisation. This study aimed to investigate the relationship between CSR and earnings quality for firms listed on FTSE 350. Besides, it aimed to explore the impact of CSR on the motivation of the management to improve the earnings quality or manage earnings. The research has applied LSDV regression and OLS regression on the data collected from 217 firms listed on the FTSE 350. The respective regression models applied by keeping earnings quality as a dependent variable and range of independent variables such as CSR, SIZE, GROWTH, LEVERAGE and ROA. Besides, the correlation coefficient has also been calculated despite, the result could not reveal the nature of the relationship between the variables hence regression model was applied. The results have revealed no relationship between earnings quality and CSR in the case of LSDV regression model. The same has been observed for the OLS model however, there exists a relatively significant relationship between earnings quality and LEVERAGE. Similar findings recorded for earnings quality and GROWTH.