Corporate social responsibility and earnings management of South African companies

Show simple item record Jordaan, Lauren A. De Klerk, Marna De Villiers, Charl Johannes 2018-06-05T07:39:30Z 2018-06-05T07:39:30Z 2018-03-29
dc.description L.A.J. (University of South Africa) was responsible for generating the idea, gathering the data, performing the analyses, concluding and writing the article. M.D.K. (University of Pretoria) and C.J.D.V. (University of Auckland, New Zealand and University of Pretoria) were involved in providing guidance throughout the process. en_ZA
dc.description.abstract BACKGROUND : Enron was considered a strong corporate social performer when their infamous accounting scandal emerged in 2000. Literature suggests that companies use corporate social responsibility (CSR) to disguise corporate misconduct. AIM AND SETTING : This study examines one type of corporate misconduct, namely, earnings management (EM). Prior studies have found significant associations between CSR performance and EM; however, none of these studies controlled for CSR disclosure. This study unbundles the effects of CSR performance and CSR disclosure on EM. To examine the relationship between CSR performance and CSR disclosures and EM of listed South African companies. METHODS : A company included on the Socially Responsible Investment (SRI)1 index is used as an indicator of CSR performance. Four measures of CSR disclosure are used. RESULTS AND CONCLUSION : The study tests both CSR performance and CSR disclosure against both real earnings management (REM) and accrual-based earnings management (AEM). CSR performance and earnings management: Companies with better CSR performance were more likely to engage in EM through income increasing discretionary accruals. This suggests that managers who inflate earnings may engage in CSR activities to avoid unwanted scrutiny from stakeholders. Companies with better CSR performance were less likely to engage in REM, suggesting that managers with better CSR performance regard the management of earnings through accruals that reverse in the next period less incriminating than managing earnings through actual company resources. CSR disclosure and earnings management: Companies that integrated their CSR disclosures more into their annual report engaged less in income decreasing discretionary accruals, suggesting that managers with incentives to make more CSR disclosures to reduce information asymmetry will also be less inclined to manage earnings. en_ZA
dc.description.department Accounting en_ZA
dc.description.librarian am2018 en_ZA
dc.description.uri en_ZA
dc.identifier.citation Jordaan, L.A., De Klerk, M. & De Villiers, C.J., 2018, ‘Corporate social responsibility and earnings management of South African companies’, South African Journal of Economic and Management Sciences 21(1), a1849. https://DOI. org/ 10.4102/sajems.v21i1.1849. en_ZA
dc.identifier.issn 1015-8812 (print)
dc.identifier.issn 2222-3436 (online)
dc.identifier.other 10.4102/sajems.v21i1.1849
dc.language.iso en en_ZA
dc.publisher University of Pretoria, Department of Economics en_ZA
dc.rights © 2018. The Authors. Licensee: AOSIS. This work is licensed under the Creative Commons Attribution License. en_ZA
dc.subject Earnings management (EM) en_ZA
dc.subject Corporate social responsibility (CSR) en_ZA
dc.subject South African companies en_ZA
dc.subject Real earnings management (REM) en_ZA
dc.title Corporate social responsibility and earnings management of South African companies en_ZA
dc.type Article en_ZA

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