Corporate Social Responsibility and Financial Reporting Quality: Evidence from Restatements

• In Event: Fraud Prevention and Audit 2

Abstract

Kim et al. (2012) indicate that firms with higher corporate social responsibility (CSR) ratings report more reliable financial information, which results in lower discretionary accruals and less earnings management through real activities manipulation. In this study, we extend the work of Kim et al. (2012) by examining the association between restatements and aggregate CSR measures as well as measures of individual CSR dimensions from 1995 to 2013. Our findings show that higher CSR ratings are associated with lower rates of accounting restatement. In addition, we find that firms with higher CSR scores in the diversity and employee dimensions are less likely to restate their financial statements. Our findings suggest that specific individual CSR dimensions are associated with variations in financial reporting quality.

Authors

• Yi-Hung Lin, National Cheng Kung University

• Hua-Wei Huang, National Cheng Kung University

• Chih-Chen Lee, Northern Illinois University

• Mark E Riley, Northern Illinois University