CSR as an impression-management strategy: the joint effect of disclosure tone management and earnings management

Purpose - This study aims to investigate corporate social responsibility (CSR) as an impression management strategy. It focuses on CSR associated with, both, disclosure tone management (TM) and earnings management (EM) practices to influence stakeholders’ perceptions. Design/methodology/approach - Based on a sample of French listed companies (SBF 120) over an eight-year period, this study empirically investigated a total of 616 firm-year observations. This study firstly investigates the impact of EM and disclosure TM practices on CSR. Then, this study examines their joint effect to explore to which extent CSR is abused for impression management inducement. To address potential endogeneity issue that may be caused by reverse causality between CSR and EM, this study used the two-stage least square. Findings - Multivariate analyses indicate that CSR is positively and significantly influenced by EM, but negatively correlated to disclosure TM. However, results highlight the absence of a significant joint effect of both discretionary practices Research limitations/implications - Because this study deals only with French companies, results are applicable only to large French firms and should be interpreted with caution. Therefore, future research may need to examine another context. Practical implications - As CSR may be used for impression management incentives, all actors interested in socially responsible issues have to bring an initiative to prevent the deviation of CSR from moral and ethical standards. Social implications - This study sheds light on the impression management strategies used in CSR reporting, so users may have to read between lines. All stakeholders should be more cautious about the reliability of financial and non-financial information and the disclosure tone manipulation practices that may arise in narrative reports. Originality/value - This research contributes to the debate around CSR from an impression management perspective. To the best of the authors’ knowledge, this study is one of the first to associate CSR with, both, disclosure TM and EM in a regulated context.