Business decision making depends on financial reporting quality. In identifying the drivers of financial reporting quality, proxied by earnings management (EM), prior literature has drawn attention to the association between corporate EM practices and commitment to corporate social responsibility (CSR). Empirical evidence, however, provides inconclusive results regarding the direction of this association. Using simultaneous equations, we examine the bi-directional CSR-EM relationship in U.S. commercial banks. We demonstrate that, although banks that engage in EM practices are also actively involved in CSR, the reverse relationship is not significant. We provide implications for investors, analysts, business participants and regulators.
|Number of pages||15|
|Early online date||14 Jun 2014|
|Publication status||Published - Sep 2014|
Bibliographical note© 2014, Elsevier. Licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International http://creativecommons.org/licenses/by-nc-nd/4.0/
Funding: European Union, Seventh Framework Programme (FP7-REGPOT-2012-2013-1) under Grant Agreement No. 316167.
- banking institutions
- corporate social responsibility
- earnings management