Corporate Social Responsibility and Accounting Restatements

• In Event: Continental Breakfast & Research and Education Forum
  In Paper Session: Table 7: Corporate Social Responsibility Reporting

Abstract

This study examines the association between corporate social responsibility (CSR) and
accounting restatements. We find that high CSR firms restate financial statements as frequently
as low CSR firms. However, compared to low CSR firms, high CSR firms are less likely to be
associated with the restatements involving egregious accounting irregularities or fraud. Capital
markets are more forgiving of high CSR firms in that market reaction to restatement
announcements is less negative for high CSR firms. We also find that high CSR firms spend
more on auditing fees, an indication that high CSR firms value high quality audits. Overall, these
results are consistent with the idea that high CSR firms are more responsible in reporting
financial results. Our results are robust to controlling for endogeneity.

Authors

• Qin Lian, Portland State University

• Lin Zheng, Kelley School of Business - Indianapolis