Corporate Social Responsibility and Earnings Management: The Role of Corporate Governance

Abstract

Purpose: The purpose of this paper is to examine the role of corporate governance in the relationship of Corporate Social Responsibility (CSR) and firm size to earnings management of manufacturing firms in Indonesia.
 Methodology: The study draws on data from 66 firms listed in Indonesian Stock Exchange from 2014 to 2017, using a multiple regression model. The present study examines the influence of CSR on earnings management, and the impact of corporate governance on the relationship between CSR and firm size with earnings management.
 Main Findings: The finding showed that the effect of CSR on earnings management was significant and positive. The study also finds a statistically significant negative relationship between firm size and earnings management. The evidence also shows the role of corporate governance in the relationship of CSR and firm size to earnings management is significant and negative, it means that when the firm has good corporate governance, the firms that allocate CSR funds are relatively large, then it will tend not to practice earnings management, likewise large firms with good corporate governance will tend not to do earnings management.
 Research limitations/implications: The present study does not include all possible other variables that influence earnings management. Further research might increase the scope of research objects by extending the study period and need to pay attention to the firm's macro factors or economic risk factors outside of financial performance so as to provide a more comprehensive picture of the results of the study.
 Originality/value: The study focuses on the role of corporate governance issues such as the independence and activity of the boards and their influence on earnings management. The subject analyses the possible impact of CSR and firms size-related earnings management that has received much attention from academic research, which has largely focused on studying the publications of corporate governance in Indonesia context and can be contributes thoughts about the importance of corporate social responsibility activities that are reported as a basis for consideration incorporate policy-making to further enhance corporate awareness in the social environment, as well as the importance of corporate governance to minimize earnings management practices.

Moderasi Kepemilikan Institusional Pada Ukuran Perusahaan dan Profitabilitas Terhadap Manajemen Laba

“…Perbedaan penelitian ini dengan peneliti sebelumnya terletak pada variabel, obyek penelitian dan waktu penelitian. Dimana penelitian (Gemi, 2019) dengan judul "Corporate Social Responsibility and Earning Management" dengan variabel X1 (CSR), X2 (Profitabilitas), X3 (DPR), Z (CG) dan Y (EM) obyek penelitian pada perusahaan sektor industri periode 2014-2017. Sedangkan peneliti ini pada sektor perbankan selama tahun pertama covid 19 (2019-2020).…”

Pentingnya corporate social responsibility pada strategi perusahaan dalam masa resesi ekonomi

“…CSR kemungkinan tidak begitu efektif di Indonesia dibandingkan negara lainnya karena beberapa miskonsepsi bahwa CSR adalah biaya tambahan daripada investasi jangka panjang (Devie et al, 2020). Isu dari CSR sendiri telah diterima secara luas dan secara global dari pemangku kepentingan serta organisasi (Wati & Malik, 2019). Memiliki penilaian CSR perusahaan yang lebih baik di periode sebelumnya berhubungan dengan pengeluaran perusahaan terhadap CSR dan menstimulasi efek dalam hasil akuntasi dan pengembalian saham di periode selanjutnya (Quéré et al, 2018).…”

Good corporate governance moderates the effect of corporate social responsibility disclosure, financial distress and managerial ability on earnings management with variable

“…The existence of an effective governance mechanism will affect inter-agency conflicts and thereby regulate the relationship between corporate social responsibility (CSR) and earnings management, so that abuse of corporate social responsibility (CSR) will occur more frequently in companies with weaker governance mechanisms (Buertey et al, 2020). According to Ruwanti et al (2019), the role of good corporate governance weakens corporate social responsibility (CSR) relationships in earnings management, meaning that if a company has good governance, it tends not to carry out earnings management. The number of board members who are more diverse in abilities, skills, academic backgrounds will place greater emphasis on earnings management actions.…”