Research On The Influence Of Earnings Management On Corporate Social Responsibility

Earnings management refers to the behavior of enterprise managers to adjust the earnings of financial statements.Through this kind of speculation,they can realize the short-term objectives of the enterprise,such as financing demand,listing demand,or maximize the selfinterest of the management,such as obtaining more salary or private interest.As a means of whitewashing financial statements,the practice of earnings management can bring a series of negative economic consequences to the enterprise itself and other stakeholders such as potential investors of the enterprise.Corporate social responsibility means that in daily operation and management activities,in addition to achieving financial performance indicators and creating value for shareholders,enterprises should also undertake responsibilities to other stakeholders such as the community,the environment,consumers,and employees.Generally speaking,companies that actively undertake social responsibilities tend to pay more attention to the interests of other stakeholders,and will more abide by relevant policies and procedures in their daily operations.However,some corporate managers will take active participation in social responsibility activities as a strategic investment,in order to gain a good reputation and become a "cover" for their implementation of certain opportunistic behaviors.Taking China’s A-share listed companies from 2012 to 2020 as a sample,this paper empirically studies whether enterprises will actively undertake social responsibility as a strategy while implementing earnings management,so as to divert the public’s attention of the quality of their earnings information.Based on the existing literature and relevant theories,this paper puts forward four hypotheses related to the research topic,and makes an empirical regression test on the relevant model by using the fixed effect of the panel data of listed companies.The results show that there is a significant positive correlation between earnings management and corporate social responsibility score in the whole sample,and enterprises actively undertake social responsibility while implementing earnings management is mainly due to the motivation of concealment and rent-seeking from the local government.Specifically,the positive correlation between earnings management and corporate social responsibility score is more significant in the samples of poor performance,non-family enterprises and non-stateowned enterprises.This paper also further studies the governance effect of internal and external corporate governance mechanism on this opportunistic behavior,that is,adding the intersection term of earnings management and corporate governance mechanism variables to the basic regression model.The study finds that equity incentive system,higher shareholding of fund institutional investors and higher equity concentration can effectively play a governance role,significantly inhibit the positive effect of earnings management on corporate social responsibility score,while the independent director system cannot play its due regulatory role.In addition,in order to ensure the robustness of the empirical research results,this paper also uses the Error Correction Model and Instrumental variable method to test the robustness of the main regression model.The test results show that the empirical research in this paper is robust to a certain extent.The research conclusions of this paper further enrich the research results related to earnings management and corporate social responsibility,reveal the strategic motivation behind corporate social responsibility investment,and provide reference for regulatory agencies to improve social responsibility-related information disclosure systems and corporate governance mechanisms.