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Does family involvement explain why corporate social responsibility affects earnings management?

Author

Listed:
  • Liu, Mingzhi
  • Shi, Yulin
  • Wilson, Craig
  • Wu, Zhenyu

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.

Suggested Citation

  • Liu, Mingzhi & Shi, Yulin & Wilson, Craig & Wu, Zhenyu, 2017. "Does family involvement explain why corporate social responsibility affects earnings management?," Journal of Business Research, Elsevier, vol. 75(C), pages 8-16.
    • Handle: RePEc:eee:jbrese:v:75:y:2017:i:c:p:8-16
    DOI: 10.1016/j.jbusres.2017.02.001
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    References listed on IDEAS

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    More about this item

    Keywords

    Corporate social responsibility; Family involvement; Accrual-based earnings management; Real earnings management;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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