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Corporate Social Responsibility, Investor Protection, and Earnings Management: Some International Evidence


To many, recent allegations of accounting fraud (or earnings management; EM) at Enron, coupled with similar ones at many other corporations, are a strong indication of a serious decay in business ethics. In academics, this raises the concern between EM and corporate social responsibility (CSR). Since it has neither been documented, nor globally tested whether CSR mitigates or increases the extent of EM, three kinds of EM are studied: earnings smoothing, earnings aggressiveness, and earnings losses and decreases avoidance. The extents to which financial characteristics and institutional variables have an impact on the extent to which companies conduct EM are also tested. Our study investigates whether the CSR-related features of 1,653 corporations in 46 countries had a positive or negative effect on the quality of their publicly released financial information during the 1993–2002 period. There is no question that with a greater commitment to CSR, the extent of earnings smoothing is mitigated, that of earnings losses and decreases avoidance is reduced, but the extent of earnings aggressiveness is increased.

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We gratefully acknowledge the comments and suggestions of Prof. A. C. Michalos, Prof. Y. H. Yeh, Dr. F. L. Hong, Prof. R. S. Snell, Prof. R. O’Brien, and participants at the 2006 World Business Ethics Forum (WBEF). We also gratefully acknowledge the financial support from the National Science Council (NSC).

Author information

Correspondence to Hsiang-Lin Chih.

Additional information

Hsiang-Lin Chih is an Associate Professor of Department of Cooperative Economics , and Director of Center for Cooperative Economics and Non-Profit Organizations at National Taipei University, Taiwan. His current research focuses on corporate social responsibility, corporate governance, and nonprofit financial management. His writings have appeared in Journal of Banking and Finance, Academia Economic Papers and in other journals. He received his Ph.D. from the National Taiwan University in 1998.

Chung-Hua Shen is a Professor of Department of Money and Banking at National Chengchi University, Taiwan. He teaches financial market and financial institutions, global financial systems and corporate governance. He was the Fulbirght scholar in 2000 and Eisenhower Fellower in 2006. He publishes paper in Journal of Banking and Finance, Journal of Money, Banking and Credit, Journal of Econometrics, Journal of International Money and Finance, International Journal of Economics and Finance, Review of Quantitative Finance & Accounting, Southern Economic Journal, Journal of Policy Modeling, Eastern Economic Journal, Journal of Macroeconomics, Pacific Basin Finance Journal, Journal of Business & Economics, International Economic Journal, Applied Economics, Applied Financial Economics, International Journal of Forecasting etc. He received his bachelor and master degree from National Taiwan Universtiy and Ph. D from Washington University in the US.

Feng-Ching Kang is a graduate student for Ph. D degree of the Department of Social Welfare at National Chung Cheng University, Taiwan. Her research focuses on nonprofit governance, social economy, cooperative economics, organization theory and business ethics. She received a MBA from the Department of Cooperative Economics, College of Business National Taipei University, Taiwan

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Chih, H., Shen, C. & Kang, F. Corporate Social Responsibility, Investor Protection, and Earnings Management: Some International Evidence. J Bus Ethics 79, 179–198 (2008). https://doi.org/10.1007/s10551-007-9383-7

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JEL Classification

  • G21
  • G34
  • G38
  • M41


  • corporate governance
  • corporate social responsibility (CSR)
  • earnings management
  • earnings opacity
  • investor protection