Earnings quality and corporate social responsibility in the Philippines and China: A multidimensional analysis through earnings management

• Main Authors: Balarbar, Paula Alyanna F., Borja, Jasmin Faye D., Tiglao, Laurence Mitchelle L.
• Format: text
• Language: English
• Published: Animo Repository 2016
• Subjects: Social responsibility of business > Philippines; Social responsibility of business > China; Financial statements > Philippines; Financial statements > China; Accounting
• Online Access: https://animorepository.dlsu.edu.ph/etd_bachelors/8915
• Institution: De La Salle University

Previous researches showed mixed results as to the relationship between corporate social responsibility (CSR) and earnings quality. Some studies showed positive relationship between the two which indicates that socially responsible firms are less likely to manipulate their financial reports. On the contrary, other studies suggested a negative relationship indicating the opportunistic behavior of managers causes firms to produce less accurate financial reports. This study focuses on determining the relationship between the quality of reports provided by the management of Philippine and Chinese firms and their CSR disclosures. Philippines and China are considered extreme opposites with respect to their giving behavior, CSR regulation, economic status, and cultural influences thus is deemed to be a good center of analysis when establishing the relationship between earnings quality and CSR. That is, whether changes in the relationship may occur. From the data gathered from online database resources such as CSRHub and Osiris, different sets of regression analysis were performed to determine the relationship of our variables. Results show that there is a negative relationship between earnings quality and CSR for both Philippines and China, that is, investing in CSR activities is not necessarily correlated with higher quality reports. Therefore, investments in CSR may actually encourage managements opportunistic behavior. Furthermore, the results show that Philippines and China differ on their perceptions of what activities increases shareholders value and what regulations incentivize specific types of CSR activities amongst firms CSR activities of Philippine firms focuses on the Community dimension while Chinese firms focuses on the Employees and Environment dimension.