Does Family Involvement Explain Why Corporate Social Responsibility Affects Earnings Management?

29 Pages Posted: 25 Jan 2017 Last revised: 27 Feb 2019

See all articles by Mingzhi Liu

Mingzhi Liu

University of Manitoba - Asper School of Business

Yulin Shi

University of Manitoba

Craig Wilson

University of Saskatchewan

Zhenyu Wu

University of Manitoba

Date Written: January 23, 2017

Abstract

We investigate how family involvement in the ownership, management, or governance of a business affects its engagement in earnings management both directly and indirectly through its corporate social responsibility (CSR) activities. Using a sample of S&P 500 companies, we find that family firms tend to have higher CSR performance, which can help them to maintain legitimacy and preserve socio-emotional wealth. Family firms also engage in less accrual-based earnings management, although they are indistinguishable from non-family firms in terms of real earnings management. In contrast to previous research, we find that CSR performance is not significantly associated with either accrual-based or real earnings management behavior after we account for the effect of family involvement. Our findings suggest that the association between CSR performance and family involvement is the primary driver of the relation between CSR performance and earnings management documented in previous research.

Keywords: Corporate Social Responsibility, Family Involvement, Accrual-based Earnings Management, Real Earnings Management

Suggested Citation

Liu, Mingzhi and Shi, Yulin and Wilson, Craig and Wu, Zhenyu, Does Family Involvement Explain Why Corporate Social Responsibility Affects Earnings Management? (January 23, 2017). Liu, M., Shi, Y., Wilson, C., & Wu, Z. (2017). Does family involvement explain why corporate social responsibility affects earnings management? Journal of Business Research, 75, 8-16.. Available at SSRN: https://ssrn.com/abstract=2904813

Mingzhi Liu (Contact Author)

University of Manitoba - Asper School of Business ( email )

460-181 Freedman Crescent
Winnipeg, Manitoba R3T 5V5
Canada
204-474-6847 (Phone)

HOME PAGE: http://umanitoba.ca/faculties/management/faculty_staff/academic_professors/mingzhi-liu.html

Yulin Shi

University of Manitoba ( email )

371 Drake, 181 Freedman Crescent
Winnipeg, MA Manitoba R3T 5V4
Canada
204-430-5759 (Phone)

Craig Wilson

University of Saskatchewan ( email )

Saskatoon, Saskatchewan S7N 5A7
Canada
1-306-966-8430 (Phone)
1-306-966-2515 (Fax)

HOME PAGE: http://www.edwards.usask.ca/faculty/Craig%20Wilson/index.html

Zhenyu Wu

University of Manitoba ( email )

181 Freedman Crescent
Winnipeg, Manitoba R3T 5V4
Canada

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