Corporate Social Responsibility and Earnings Management: Evidence from Vietnam

Main Article Content

Thong Tien Nguyen
Nhi Phuong Doan
Hung Kim Vuong

Abstract

Managers might use corporate social responsibility (CSR) to conceal their misbehaviours. One of these is the implementation of earnings management (EM), which could have serious effects vis-à-vis information disclosed to stakeholders. This study examined the relationship between CSR and EM in Vietnam using the Kinder, Lydenberg, Domini (KLD) scale on five aspects: community, diversity, employees, environment, and products. The results show that in the economic context of Vietnam, for the enterprises in the consumer goods and consumer services industries, those firms with higher CSR scores are more likely to engage in EM. This finding provides additional evidence on the relation between CSR and EM and contributes to streams of studies on earnings and CSR.

Article Details

How to Cite
Corporate Social Responsibility and Earnings Management: Evidence from Vietnam. (2024). Asian Academy of Management Journal, 29(1), 127–142. https://doi.org/10.21315/aamj2024.29.1.5
Section
Original Articles

References

REFERENCES

Ben Amar, A., & Chakroun, S. (2018). Do dimensions of corporate social responsibility affect earnings management? Evidence from France. Journal of Financial Reporting and Accounting, 16(2), 348–370. https://doi.org/10.1108/JFRA-05-2017-0033

Bozzolan, S., Fabrizi, M., Mallin, C. A., & Michelon, G. (2015). Corporate social responsibility and earnings quality: International evidence. International Journal of Accounting, 50(4), 361–396. https://doi.org/10.1016/j.intacc.2015.10.003

Chakroun, S., Ben Amar, A., & Ben Amar, A. (2021). Earnings management, financial performance and the moderating effect of corporate social responsibility: Evidencefrom France. Management Research Review, 45(3), 331–362. https://doi.org/10.1108/MRR-02-2021-0126

Choi, H., Choi, B., & Byun, J. (2018). The relationship between corporate social responsibility and earnings management: accounting for endogeneity. Investment Management and Financial Innovations, 15(4), 69–84. http://dx.doi.org/10.21511/imfi.15(4).2018.06

DeFond, M. L., & Jiambalvo, J. (1994). Debt covenant violation and manipulation of accruals. Journal of Accounting and Economics, 17(1–2), 145–176. https://doi.org/10.1016/0165-4101(94)90008-6

Di Giuli, A., & Kostovetsky, L. (2014). Are red or blue companies more likely to go green? Politics and corporate social responsibility. Journal of Financial Economics, 111(1), 158–180. https://doi.org/10.1016/j.jfineco.2013.10.002

Dimitropoulos, P. E. (2020). Corporate social responsibility and earnings management in the EU: A panel data analysis approach. Social Responsibility Journal, 18(1), 68–84. https://doi.org/10.1108/SRJ-04-2020-0156

Freeman, R. E. (2016). A stakeholder theory of the modern corporation. In M. Clarkson (Ed.), The corporation and its stakeholders (pp. 125–138). University of Toronto Press.

Gaio, C., Gonçalves, T., & Sousa, M. V. (2022). Does corporate social responsibility mitigate earnings management? Management Decision, 60(11), 2972–2989. https://doi.org/10.1108/MD-05-2021-0719

Gonçalves, T., Gaio, C., & Costa, E. (2020). Committed vs opportunistic corporate and social responsibility reporting. Journal of Business Research, 115, 417–427. https://doi.org/10.1016/j.jbusres.2020.01.008

Gonçalves, T., Gaio, C., & Ferro, A. (2021). Corporate social responsibility and earnings management: Moderating impact of economic cycles and financial performance. Sustainability, 13(17), 9969. https://doi.org/10.3390/su13179969

Healy, P. M., & Wahlen, J. M. (1999). A review of the earnings management literature and its implications for standard setting. Accounting Horizons, 13(4), 365–383. http://dx.doi.org/10.2308/acch.1999.13.4.365

Jensen, M., & Meckling, W. (1976). Theory of the firm: Manager behaviour, agency costs and analogous situations. Journal of Financial Economics, 3, 323–329. https://doi.org/10.2139/ssrn.94043

Jones, J. J. (1991). Earnings management during import relief investigations. Journal of Accounting Research, 29(2), 193–228. https://doi.org/10.2307/2491047

Kim, S. H., Udawatte, P., & Yin, J. (2019). The effects of corporate social responsibility on real and accrual‐based earnings management: Evidence from China. Australian Accounting Review, 29(3), 580–594. https://doi.org/10.1111/auar.12235

Kothari, S. P., Leone, A. J., & Wasley, C. E. (2005). Performance matched discretionary accrual measures. Journal of Accounting and Economics, 39(1), 163–197. https://doi.org/10.1016/j.jacceco.2004.11.002

Kumala, R., & Siregar, S. V. (2020). Corporate social responsibility, family ownership and earnings management: The case of Indonesia. Social Responsibility Journal, 17(1), 69–86. https://doi.org/10.1108/SRJ-09-2016-0156

Lin, Z., Liu, M., & Noronha, C. (2016). The impact of corporate governance on informative earnings management in the Chinese market. Abacus, 52(3), 568–609. https://doi.org/10.1111/abac.12084

Palacios-Manzano, M., Gras-Gil, E., & Santos-Jaen, J. M. (2019). Corporate social responsibility and its effect on earnings management: An empirical research on Spanish firms. Total Quality Management and Business Excellence, 32(7–8), 921–937. https://doi.org/10.1080/14783363.2019.1652586

Prior, D., Surroca, J., & Tribó, J. A. (2008). Are socially responsible managers really ethical? Exploring the relationship between earnings management and corporate social responsibility. Corporate Governance: An International Review, 16(3), 160–177. https://doi.org/10.1111/j.1467-8683.2008.00678.x

Rezaee, Z., Dou, H., & Zhang, H. (2020). Corporate social responsibility and earnings quality: Evidence from China. Global Finance Journal, 45, 100473. https://doi.org/10.1016/j.gfj.2019.05.002

Schipper, K. (1989). Commentary on earnings management. Accounting Horizons, 3(4), 91–102.

Triliawati, Y. (2020). Analysis of factors affecting the earnings management on the consumer goods industry issuers on the IDX. Journal of Contemporary Information Technology, Management, and Accounting, 1(2), 55–62.

Tuovila, A. (2023). Cost of revenue: What it is, how it’s calculated, example. Investopedia. https://www.investopedia.com/terms/c/cost-of-revenue.asp

Van Thanh, P., & Podruzsik, S. (2018). CSR in developing countries: Case study in Vietnam.

Management, 13(4), 287–300. http://dx.doi.org/10.26493/1854-4231.13.287-300 Zahra, S. A., Priem, R. L., & Rasheed, A. A. (2005). The antecedents and consequences of top management fraud. Journal of Management, 31(6), 803–828. https://doi.org/10.1177/0149206305279598