Earnings Management and Corporate Social Responsibility: UK Evidence

Abstract

Purpose
The paper attempt a closer investigation to re-interpret the role of CSR in limiting the extreme practices in earnings management (EM), using evidence from large UK companies.

Design/methodology/approach
The study has employed content analysis and disclosure index to measure the level of CSR. we measure EM based on discretionary accruals 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 employed in this study for CSR (disclosure index/content analysis) is considered to provide a more detailed and precise measure.