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Is Earnings Quality Associated with Corporate Social Responsibility? Evidence from the Korean Market

1
Division of Economics and Information Statistics, Kangwon National University, Chuncheon 24341, Korea
2
College of Economics and Finance, Hanyang University, Seoul 04763, Korea
*
Author to whom correspondence should be addressed.
Sustainability 2019, 11(15), 4116; https://doi.org/10.3390/su11154116
Received: 5 July 2019 / Revised: 24 July 2019 / Accepted: 29 July 2019 / Published: 30 July 2019
(This article belongs to the Section Economic and Business Aspects of Sustainability)
Socially responsible firms are believed to behave in a responsible manner to restrict earnings management and thus deliver more reliable and transparent financial information to investors. We test this hypothesis by predicting a higher quality of financial reporting for socially responsible firms in the Korean market. The entire sample analysis provides evidence for the hypothesis in the use of discretionary accruals as proxy variables for the quality of financial reporting. However, our sub-sample analysis indicates that such weak support is driven by a group of environmentally sensitive firms and the affiliates of large family-owned conglomerates, or chaebol. Socially responsible firms are less likely to be involved with earnings management in the group of non-environmentally sensitive industries and non-chaebol affiliates. These firms provide a better quality of financial reporting in terms of both the use of discretionary accruals and real activity manipulations. In line with recent studies, our findings suggest that ethical concerns in producing high-quality financial reports rely significantly on firm characteristics. View Full-Text
Keywords: chaebol; corporate social responsibility; earnings management; ESG score; environmentally sensitive industries; Korea chaebol; corporate social responsibility; earnings management; ESG score; environmentally sensitive industries; Korea
MDPI and ACS Style

Yoon, B.; Kim, B.; Lee, J.H. Is Earnings Quality Associated with Corporate Social Responsibility? Evidence from the Korean Market. Sustainability 2019, 11, 4116. https://doi.org/10.3390/su11154116

AMA Style

Yoon B, Kim B, Lee JH. Is Earnings Quality Associated with Corporate Social Responsibility? Evidence from the Korean Market. Sustainability. 2019; 11(15):4116. https://doi.org/10.3390/su11154116

Chicago/Turabian Style

Yoon, Bohyun, Byul Kim, and Jeong H. Lee. 2019. "Is Earnings Quality Associated with Corporate Social Responsibility? Evidence from the Korean Market" Sustainability 11, no. 15: 4116. https://doi.org/10.3390/su11154116

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