Accounting conservatism and corporate social responsibility |
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Authors: | Seraina C Anagnostopoulou Andrianos E Tsekrekos Georgios Voulgaris |
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Institution: | 1. University of Piraeus, Department of Banking and Financial Management, Greece;2. Athens University of Economics and Business, Department of Accounting and Finance, Greece;3. University of Manchester, Alliance Manchester Business School, UK |
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Abstract: | We examine the association between accounting conservatism, expressed in the form of asymmetric timeliness of recognition of economic gains and losses, and corporate social responsibility (CSR). We provide evidence that, under unfavorable macroeconomic conditions and financial constraints, as well as increased levels of outside pressure from debtholders and equity holders, catering for capital providers through conservative reporting becomes a managerial priority over engagement in CSR. Our results overall indicate that, for our whole sample period (starting in the early 2000s), higher levels of conservatism are negatively associated with a CSR orientation shown by firms; however, our analysis also indicates a significant reversing trend regarding the effect of conservatism on CSR, coinciding with the post-financial-crisis period. The findings are robust to a number of specifications and tests, including the use of an instrumental variable approach explicitly addressing endogeneity biases related to reverse causality concerns. Our study suggests that, under monitoring pressure from financial stakeholders, firms prioritize commitment to accounting conservatism over the needs of non-financial stakeholders and other interest groups. |
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Keywords: | Accounting conservatism Corporate social responsibility Earnings' asymmetric timeliness Managerial discretion M41 M14 G30 |
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