Can Corporate Social Responsibility Counteract Managers' Incentives to Manage Earnings?

33 Pages Posted: 12 Jun 2017

See all articles by Christopher P. Agoglia

Christopher P. Agoglia

University of Massachusetts at Amherst

Cathy Beaudoin

University of Vermont

G. Bradley Bennett

University of Massachusetts Amherst - Isenberg School of Management

George T. Tsakumis

University of Delaware - Alfred Lerner College of Business and Economics

Date Written: June 1, 2017

Abstract

Many firms engage in corporate social responsibility (CSR) initiatives, which aim to serve a broader set of stakeholders (e.g. workforce, communities, environment). These companies often encourage management to consider these stakeholders when making operational and financial decisions. One such decision that managers face involves managing earnings. We conduct an experiment in which experienced managers are placed in the role of a division manager facing an accrual decision. We find that a company’s demonstrated commitment to CSR moderates both upward and downward earnings management attempts. We propose, and find support for, a moderated-mediation model in which the firm’s commitment to CSR influences managers’ consideration of constituents. Managers’ consideration of these stakeholders differentially affects the level of accruals, depending on the direction of the earnings management incentive. Our results provide insight into how CSR may influence individuals’ decisions within the organization, minimizing the impact that incentives have on maximizing one’s self-interest.

Keywords: Corporate Social Responsibility, Earnings Management, Discretionary Accruals, Personal Incentives

Suggested Citation

Agoglia, Christopher P. and Beaudoin, Cathy and Bennett, George Bradley and Tsakumis, George T., Can Corporate Social Responsibility Counteract Managers' Incentives to Manage Earnings? (June 1, 2017). Available at SSRN: https://ssrn.com/abstract=2984083 or http://dx.doi.org/10.2139/ssrn.2984083

Christopher P. Agoglia (Contact Author)

University of Massachusetts at Amherst ( email )

Department of Accounting & Information Systems
121 Presidents Drive
Amherst, MA 01003-4910
United States
413 545-5582 (Phone)
413 545-3858 (Fax)

Cathy Beaudoin

University of Vermont ( email )

212 Kalkin Hall
Burlington, VT 05405-0158
United States

George Bradley Bennett

University of Massachusetts Amherst - Isenberg School of Management ( email )

Amherst, MA 01003-4910
United States

George T. Tsakumis

University of Delaware - Alfred Lerner College of Business and Economics ( email )

419 Purnell Hall
Newark, DE 19716
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
195
Abstract Views
1,306
rank
170,127
PlumX Metrics