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Final published version
Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
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TY - JOUR
T1 - Corporate social responsibility as a strategic shield against costs of earnings management practices
AU - Martínez Ferrero, Jennifer
AU - Banerjee, Shantanu
AU - María García Sánchez, Isabel
N1 - The final publication is available at Springer via http://dx.doi.org/10.1007/s10551-014-2399-x
PY - 2016/1
Y1 - 2016/1
N2 - We highlight how Corporate Social Responsibility (CSR) can be strategically used against the negative perception from earnings management (EM). Using international data, we analyse the effect of CSR and EM on the cost of capital and corporate reputation. Results confirm that CSR strategy is positively valued by investors and other stakeholders. Contrary to EM, CSR has a positive effect on corporate reputation and lowers the cost of capital. In addition, we also find that the favorable effect of CSR on cost of capital is consistently more intense in firms that show signs of EM indicating that the market does not identify when CSR practices are used as a strategy to mask EM. We also demonstrate how institutional factors influence the above relationship.
AB - We highlight how Corporate Social Responsibility (CSR) can be strategically used against the negative perception from earnings management (EM). Using international data, we analyse the effect of CSR and EM on the cost of capital and corporate reputation. Results confirm that CSR strategy is positively valued by investors and other stakeholders. Contrary to EM, CSR has a positive effect on corporate reputation and lowers the cost of capital. In addition, we also find that the favorable effect of CSR on cost of capital is consistently more intense in firms that show signs of EM indicating that the market does not identify when CSR practices are used as a strategy to mask EM. We also demonstrate how institutional factors influence the above relationship.
U2 - 10.1007/s10551-014-2399-x
DO - 10.1007/s10551-014-2399-x
M3 - Journal article
VL - 133
SP - 305
EP - 324
JO - Journal of Business Ethics
JF - Journal of Business Ethics
SN - 0167-4544
IS - 2
ER -