Title: The relationship between corporate social responsibility disclosure and earnings management: is it a complement mechanism or a substitute mechanism?

Authors: Faisal Faisal; Alif Rishal Prasetya; Anis Chariri; Haryanto Haryanto

Addresses: Accounting Department, Universitas Diponegoro, Semarang, Indonesia ' Accounting Department, Universitas Diponegoro, Semarang, Indonesia ' Accounting Department, Universitas Diponegoro, Semarang, Indonesia ' Accounting Department, Universitas Diponegoro, Semarang, Indonesia

Abstract: Prior literature has provided inconclusive results concerning the relationship between corporate social responsibility disclosure (CSRD) and earnings management (EM). This study examines the relation between CSRD and EM. For this study, 479 annual reports of publicly listed Indonesian companies were selected as the sample. The two-stage least square (2SLS) method was employed to test the relationship between CSRD and EM. Our findings suggest that companies that have high CSRD are less likely to manage earnings. Moreover, our findings suggest that the relationship between CSRD and EM can be viewed as a substitute mechanism. This study contributes to the accounting literature by examining the relationship between CSRD and EM in the setting of an emerging country.

Keywords: corporate social responsibility; CSR; earnings management; real activity; disclosure; two-stage least square; 2SLS; Indonesia.

DOI: 10.1504/IJBGE.2018.095411

International Journal of Business Governance and Ethics, 2018 Vol.13 No.1, pp.1 - 14

Received: 08 Nov 2017
Accepted: 02 Jun 2018
Published online: 03 Oct 2018 *

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