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Earnings management and corporate social responsibility: UK evidence

Yousf Almahrog (Department of Accounting, Al-jabel Al-Gharbi University, Al-jabel Al-Gharbi, Libya)
Zakaria Ali Aribi (Department of Accounting and Finance, University of Central Lancashire, Preston, UK)
Thankom Arun (University of Essex, Colchester, UK)

Journal of Financial Reporting and Accounting

ISSN: 1985-2517

Article publication date: 11 June 2018

3450

Abstract

Purpose

The paper aims to re-interpret the role of corporate social responsibility (CSR) in limiting the extreme practices in earnings management (EM) by using evidence from large UK companies.

Design/methodology/approach

The study has used content analysis and disclosure index to measure the level of CSR. The authors measured EM based on discretionary accruals by using cross-sectional version of the modified Jones model.

Findings

The findings of this study reveal that companies with a higher commitment to CSR activities are less likely to manage earnings through accruals.

Originality/value

This study shed more light on the potential impact of CSR on earnings management in the context of the UK. Prior research on the impact of CSR on earnings management has used exclusively CSR scores, provided by CSR score indices. The manual measurement used in this study for CSR (disclosure index/content analysis) is considered to provide a more detailed and precise measure.

Keywords

Citation

Almahrog, Y., Ali Aribi, Z. and Arun, T. (2018), "Earnings management and corporate social responsibility: UK evidence", Journal of Financial Reporting and Accounting, Vol. 16 No. 2, pp. 311-332. https://doi.org/10.1108/JFRA-11-2016-0092

Publisher

:

Emerald Publishing Limited

Copyright © 2018, Emerald Publishing Limited

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