Is Corporate Social Responsibility Performance Related to Conditional Accounting Conservatism?

Accounting Horizons, Volume 34, Issue 2, 2020

54 Pages Posted: 28 Feb 2020 Last revised: 10 Aug 2020

See all articles by Qing Burke

Qing Burke

Miami University of Ohio

Po-Chang Chen

Miami University of Ohio - Richard T. Farmer School of Business Administration

Gerald J. Lobo

University of Houston - C.T. Bauer College of Business

Date Written: January 15, 2020

Abstract

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.

Keywords: corporate social responsibility; conditional conservatism; information asymmetry

JEL Classification: M41

Suggested Citation

Burke, Qing and Chen, Po-Chang and Lobo, Gerald J., Is Corporate Social Responsibility Performance Related to Conditional Accounting Conservatism? (January 15, 2020). Accounting Horizons, Volume 34, Issue 2, 2020, Available at SSRN: https://ssrn.com/abstract=3533409 or http://dx.doi.org/10.2139/ssrn.3533409

Qing Burke

Miami University of Ohio ( email )

Oxford, OH 45056
United States

Po-Chang Chen (Contact Author)

Miami University of Ohio - Richard T. Farmer School of Business Administration ( email )

3086 Farmer School of Business
Oxford, OH 45056
United States

Gerald J. Lobo

University of Houston - C.T. Bauer College of Business ( email )

Houston, TX 77204-6021
United States
713-743-4838 (Phone)
713-743-4828 (Fax)

HOME PAGE: http://www.bauer.uh.edu/acct/acctprofile.asp?search=Gerald%20Lobo

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
376
Abstract Views
1,328
Rank
144,887
PlumX Metrics