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Ethics, Diversity Management, and Financial Reporting Quality

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An Erratum to this article was published on 10 March 2010

An Erratum to this article was published on 10 March 2010

Abstract

This article proposes and empirically tests a theoretical framework incorporating Reidenbach and Robin’s (J Bus Ethics 10(4):273–284, 1991) conceptual model of corporate moral development. The framework is used to examine the relation between governance and business ethics, as proxied by diversity management (DM), and financial reporting quality, as proxied by the magnitude of earnings management (EM). The level of DM and governance quality are measured in accordance with the ratings of Jantzi Research (JR), a leading provider of social and governance research for institutional investors. This DM score is part of an index developed by JR that investment managers use to integrate DM criteria into their investment decisions. As expected, a negative relation between corporate DM development and financial reporting quality is found while controlling for other factors known in the literatures on governance and accounting choices to affect earnings quality. Despite some caveats presented in conclusion, this study contributes to the ethics, governance, and financial reporting literatures by studying the dynamics between governance and ethics in the prevention of EM.

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Authors and Affiliations

  1. HEC Montreal, Montreal, QC, Canada

    Réal Labelle & Claude Francoeur

  2. FSEG Sfax, Sfax, Tunisia

    Rim Makni Gargouri

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  1. Réal Labelle
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  2. Rim Makni Gargouri
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  3. Claude Francoeur
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Correspondence to Claude Francoeur.

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An erratum to this article can be found at http://dx.doi.org/10.1007/s10551-010-0456-7

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Labelle, R., Makni Gargouri, R. & Francoeur, C. Ethics, Diversity Management, and Financial Reporting Quality. J Bus Ethics 93, 335–353 (2010). https://doi.org/10.1007/s10551-009-0225-7

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