IDEAS home Printed from https://ideas.repec.org/a/gam/jecomi/v12y2024i12p329-d1535290.html
   My bibliography  Save this article

The Impact of Corporate Social Responsibility on the Use of Earnings Management in the Context of Internal Financial and Macroeconomic Factors: The Case of Lithuania

Author

Listed:
  • Diana Bachtijeva

    (Department of Accounting and Audit, Faculty of Economics and Business Administration, Vilnius University, LT-10222 Vilnius, Lithuania)

  • Daiva Tamulevičienė

    (Department of Accounting and Audit, Faculty of Economics and Business Administration, Vilnius University, LT-10222 Vilnius, Lithuania)

  • Rasa Subačienė

    (Department of Accounting and Audit, Faculty of Economics and Business Administration, Vilnius University, LT-10222 Vilnius, Lithuania)

Abstract

Earnings management is a widespread phenomenon in practice, with researchers therefore focusing on trying to understand what motives and factors lead to companies engaging in earnings management. In addition to internal financial and macroeconomic factors, the influence of institutional factors including corporate social responsibility (CSR) has been widely studied in recent years. In Lithuania, there have been no studies on the manipulation of accounting information in socially responsible companies. Therefore, this study aims to identify the impact of CSR on the application of earnings management in the context of internal financial and macroeconomic factors. The results of this study are significant as they not only enable assessing the impact of social responsibility on the application of earnings management in Lithuanian companies, but also the influence of macroeconomic factors such as the gross domestic product (GDP), inflation, foreign direct investment (FDI), average wages, and unemployment, as well as internal financial factors such as leverage, returns on assets (RoA), and the profitability of EBIT. The results show that CSR reduces the use of earnings management, regardless of whether it is accrual-based or real earnings management. Additionally, this analysis demonstrates that, among the internal financial factors, leverage carries the most substantial influence. The higher a company’s leverage, the more inclined that company is to use earnings management. Exploring the impact of macroeconomic indicators, it was found that the GDP, inflation, and unemployment rate have a statistically significant impact on the use of earnings management, albeit only if the firm uses accrual-based earnings management and adopts a profit-enhancing strategy.

Suggested Citation

  • Diana Bachtijeva & Daiva Tamulevičienė & Rasa Subačienė, 2024. "The Impact of Corporate Social Responsibility on the Use of Earnings Management in the Context of Internal Financial and Macroeconomic Factors: The Case of Lithuania," Economies, MDPI, vol. 12(12), pages 1-21, December.
    • Handle: RePEc:gam:jecomi:v:12:y:2024:i:12:p:329-:d:1535290
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2227-7099/12/12/329/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2227-7099/12/12/329/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Thomas Dilger & Sabine Graschitz, 2015. "Influencing Factors on Earnings Management, Empirical Evidence from Listed German and Austrian Companies," International Journal of Business and Economic Sciences Applied Research (IJBESAR), Democritus University of Thrace (DUTH), Kavala Campus, Greece, vol. 8(2), pages 69-86, October.
    2. Roychowdhury, Sugata, 2006. "Earnings management through real activities manipulation," Journal of Accounting and Economics, Elsevier, vol. 42(3), pages 335-370, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Isaac Selasi Awuye & François Aubert, 2022. "The impact of leverage on earnings management and the trade-off between discretionary accruals and real earnings management," Post-Print hal-03824383, HAL.
    2. Wei, Lang & Zhang, Yiling, 2023. "Nonfinancial indicators in identifying stock price crash risk," Finance Research Letters, Elsevier, vol. 52(C).
    3. Tianjiao Zhao & Xiang Xiao & Qinghui Dai, 2021. "Transportation Infrastructure Construction and High-Quality Development of Enterprises: Evidence from the Quasi-Natural Experiment of High-Speed Railway Opening in China," Sustainability, MDPI, vol. 13(23), pages 1-23, December.
    4. Li, Chunyu & Lou, Chenxin & Luo, Dan & Xing, Kai, 2021. "Chinese corporate distress prediction using LASSO: The role of earnings management," International Review of Financial Analysis, Elsevier, vol. 76(C).
    5. Navarro-García, Juan Carlos & Madrid-Guijarro, Antonia, 2016. "Real economic activity and accounting information in Spanish construction and real estate firms," Revista de Contabilidad - Spanish Accounting Review, Elsevier, vol. 19(1), pages 21-30.
    6. Shan Lu & Peng Wu & Lei Gao & Richard Gifford, 2023. "Are State-Owned Enterprises Equally Reliable Information Suppliers? An Examination of the Impacts of State Ownership on Earnings Management Strategies of Chinese Enterprises," Mathematics, MDPI, vol. 11(4), pages 1-26, February.
    7. Alessandro Paolo Rigamonti & Giulio Greco & Mariarita Pierotti & Alessandro Capocchi, 2024. "Macroeconomic uncertainty and earnings management: evidence from commodity firms," Review of Quantitative Finance and Accounting, Springer, vol. 62(4), pages 1615-1649, May.
    8. Yun Meng & Christos Pantzalis, 2021. "Lottery-type stocks and corporate strategies at the turn of the month," Review of Quantitative Finance and Accounting, Springer, vol. 56(3), pages 1027-1055, April.
    9. Z. Jun Lin & Shengqiang Liu & Fangcheng Sun, 2017. "The Impact of Financing Constraints and Agency Costs on Corporate R&D Investment: Evidence from China," International Review of Finance, International Review of Finance Ltd., vol. 17(1), pages 3-42, March.
    10. Lu, Susan Feng & Dranove, David, 2013. "Profiting from gaizhi: Management buyouts during China’s privatization," Journal of Comparative Economics, Elsevier, vol. 41(2), pages 634-650.
    11. Ammar Hussain & Minhas Akbar & Muhammad Kaleem Khan & Ahsan Akbar & Mirela Panait & Marian Catalin Voica, 2020. "When Does Earnings Management Matter? Evidence across the Corporate Life Cycle for Non-Financial Chinese Listed Companies," JRFM, MDPI, vol. 13(12), pages 1-19, December.
    12. Faradisa Bachmid & Sumiati Sumiati & Siti Aisjah, 2021. "The effect of financial distress using the Altman and Springate Models on stock return in mediated earnings management:A study on textile and garment companies listed on the Indonesia Stock Exchange 2," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 10(5), pages 119-128, July.
    13. Nagar, Neerav & Sen, Kaustav, 2016. "Earnings management in India: Managers’ fixation on operating profits," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 26(C), pages 1-12.
    14. Lin, Hsiou-Wei William & Lo, Huai-Chun & Wu, Ruei-Shian, 2016. "Modeling default prediction with earnings management," Pacific-Basin Finance Journal, Elsevier, vol. 40(PB), pages 306-322.
    15. Md. Borhan Uddin Bhuiyan & Solomon Opare & Zahir Ahmed, 2024. "Does Audit Committee Busyness Affect Financial Restatement? Evidence from Audit Committee Share Ownership," Australian Accounting Review, CPA Australia, vol. 34(1), pages 29-54, March.
    16. Thomas A. Gilliam, 2021. "Detecting Real Activities Manipulation: Beyond Performance Matching," Abacus, Accounting Foundation, University of Sydney, vol. 57(4), pages 619-653, December.
    17. Loureiro, Gilberto & Silva, Sónia, 2022. "Earnings management and stock price crashes post U.S. cross-delistings," International Review of Financial Analysis, Elsevier, vol. 82(C).
    18. Haeyoung Shin & Michael Lacina & Shanshan Pan, 2024. "The order in a series of continuous special items and the likelihood of income classification shifting," Review of Quantitative Finance and Accounting, Springer, vol. 63(3), pages 829-862, October.
    19. Chen, Yangyang & Duong, Huu Nhan & Goyal, Abhinav & Veeraraghavan, Madhu, 2023. "Social capital and the pricing of initial public offerings," Journal of Empirical Finance, Elsevier, vol. 74(C).
    20. Manish Bansal, 2024. "Unpacking the drivers of earnings management in CSR firms: influence of investor risk perception," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 21(1), pages 127-142, March.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jecomi:v:12:y:2024:i:12:p:329-:d:1535290. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.