Why Do Socially Responsible Firms Manage Earnings?

Posted: 9 Sep 2014 Last revised: 12 Sep 2014

See all articles by Jan Barton

Jan Barton

Emory University

Marcus Kirk

University of Florida - Fisher School of Accounting

David A. Reppenhagen

UNCC - Turner School of Accountancy

Jane M. Thayer

University of Virginia

Date Written: September 11, 2014

Abstract

We examine the incentives of socially responsible firms, relative to a set of control firms, to engage in earnings management. We measure socially responsible behavior using various proxies of corporate social responsibility, and earnings management using abnormal levels of accruals, cash flows, inventory production, and discretionary expenses. We find that socially responsible firms manage earnings mainly to meet analysts’ earnings forecasts and to reduce financing and tax costs, rather than to opportunistically to increase management’s compensation or equity stakes. Our findings suggest that whether firms view earnings management as socially responsible depends on the manner and reasons for managing earnings.

Keywords: financial reporting quality; earnings management; accounting choice; corporate social responsibility

Suggested Citation

Barton, Jan and Kirk, Marcus and Reppenhagen, David A. and Thayer, Jane M., Why Do Socially Responsible Firms Manage Earnings? (September 11, 2014). Available at SSRN: https://ssrn.com/abstract=2492910

Jan Barton

Emory University ( email )

1300 Clifton Road
Atlanta, GA 30322-2722
United States
404-727-6398 (Phone)
404-727-6313 (Fax)

Marcus Kirk (Contact Author)

University of Florida - Fisher School of Accounting ( email )

Warrington College of Business
PO Box 117166
Gainesville, FL 32611-7166
United States
352-273-0222 (Phone)

David A. Reppenhagen

UNCC - Turner School of Accountancy ( email )

9201 University City Blvd
Charlotte, NC 28223
United States
7046875394 (Phone)

HOME PAGE: http://https://belkcollege.uncc.edu/directory/david-reppenhagen

Jane M. Thayer

University of Virginia ( email )

1400 University Ave
Charlottesville, VA 22903
United States

Register to save articles to
your library

Register

Paper statistics

Abstract Views
1,129
PlumX Metrics