EXAMINING THE NEXUS BETWEEN CORPORATE SOCIAL RESPONSIBILITY DISCLOSURE AND EARNINGS MANAGEMENT: EVIDENCE FROM THE STATE-OWNED ENTERPRISES OF BANGLADESH

Year 2024, , 24 - 36, 03.06.2024

Raihan Sobhan Touhida Sharmin

https://doi.org/10.17261/Pressacademia.2024.1899

Abstract

Purpose- The purpose of the study is to examine the association between corporate social responsibility (CSR) disclosure and the practice of earnings management in the listed state-owned enterprises (SOEs) of Bangladesh.
Methodology- All the listed SOEs (17 firms) of Dhaka Stock Exchange (DSE) for the years 2017-2022 were considered in the study, resulting in observations of 102 firm-years. Content analysis was used to assess the level of CSR disclosure in the annual reports. For measuring earnings management, Beneish M-score model was used as the proxy variable. To investigate the association between CSR disclosure and earnings management, multivariate regression analysis was conducted using pooled OLS model, random effects model and lag model.
Findings- The regression outcomes of the study found a positive and significant association between CSR disclosure and earnings management. This study shows how managers can use CSR disclosures as a competitive advantage by manipulating earnings while also fostering positive relationships with stakeholders.
Conclusion- Investors and governments alike are increasingly demanding ethical business practices and full disclosure from corporations. The study concludes that managers' opportunistic behavior is a primary motivation for using CSRD to cover their tracks. This study will provide valuable insights to the policy-makers, regulators, investors and other stakeholders on how CSR reporting can be used as a medium to hide management’s manipulative practices and, why it is important to implement a more comprehensive guideline on CSR reporting and effective governance to eliminate such practices.

Keywords

Corporate social responsibility (CSR) disclosure, earnings management, Beneish M-Score, state-owned companies (SOEs), Bangladesh

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