Does CSR Performance Impact a Firms' Engagement in Earnings Management?

Sammanfattning: This study examines the relationship between corporate social responsibility (CSR) and earnings management (EM). Specifically, we question whether firms investing in CSR also behave in an ethical manner to constrain EM, or if they engage in CSR as a way to hide corporate misconduct. We study a large sample of publicly listed firms in the European Union (EU) and by employing well-established models for discretionary accruals (DA) we identify EM. Our findings reveal no significant relationship between CSR and EM, suggesting that higher CSR performance does not impact the extent to which earnings are managed. Our robust findings persist even upon excluding the country with the highest number of observations in our sample, reinforcing the notion that ethical considerations do not significantly impact EM practices. Our findings benefit investors and other stakeholders by providing contemporary insights into the CSR and EM relationship.