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- Title
Is Corporate Social Responsibility Performance Related to Conditional Accounting Conservatism?
- Authors
Burke, Qing L.; Chen, Po-Chang; Lobo, Gerald J.
- Abstract
SYNOPSIS: We examine the relation between corporate social responsibility (CSR) performance and conditional accounting conservatism. Drawing upon the stakeholder-engaging and information-enhancing perspectives of CSR activities, we hypothesize that the demand for conditional conservatism, which primarily arises from various contracting parties' concern about managerial opportunism and/or information asymmetry, is lower for better-performing CSR firms. Using the CSR ratings from the KLD database, we find, as predicted, a negative relation between CSR performance and conditional conservatism. These findings are robust to using a difference-in-differences research design and alternative measures of conditional conservatism. Further, cross-sectional analyses reveal that the negative association is more pronounced for firms with greater information asymmetry and stronger corporate governance. Overall, this study enhances our understanding of how a firm's CSR engagement may relate to an important attribute of financial reporting.
- Subjects
SOCIAL responsibility of business; CONSERVATISM (Accounting); INFORMATION asymmetry; FINANCIAL statements; CONSERVATISM
- Publication
Accounting Horizons, 2020, Vol 34, Issue 2, p19
- ISSN
0888-7993
- Publication type
Article
- DOI
10.2308/horizons-18-111