Corporate Social Responsibility Disclosure and Management Opportunism: The Role Moderating of Corporate Governance

Document Type : Research Paper


1 Prof., Department of Accounting, Faculty of Accounting and Financial Sciences, College of Management, University of Tehran, Tehran, Iran.

2 Assistant Prof., Department of Accounting, Faculty of Humanities and Social Sciences, University of Kurdistan, Sanandaj, Iran.

3 MSc. Student, Department of Accounting, Faculty of Accounting and Financial Sciences, College of Management, University of Tehran, Tehran, Iran.



Objective: In the present day, companies are not only responsible for enhancing shareholder wealth but also for placing a significant emphasis on social and environmental considerations. Transparency in non-financial reporting, including Corporate Social Responsibility (CSR), now holds equal importance alongside financial disclosures. The more responsible and ethical a company is regarding social and environmental issues, the less incentive it has to engage in unethical financial practices, such as earnings management. According to the existing literature, corporate governance mechanisms have been created to reduce the representation problem between managers and shareholders. These mechanisms act as a monitoring system to align the managers' interests with the beneficiaries and can lead to reducing the opportunistic behavior of the management. The purpose of this research is to investigate the existence and direction of the relationship between corporate social responsibility (CSR) disclosure and two types of earnings management (real and accrual) based on the opportunistic managerial view and also to study the moderating effect of corporate governance mechanisms on this relationship.
Methods: To test and analyze the hypotheses, the panel data of 108 companies from 2016 to 2021 and multivariable regression controlling the fixed effects of year and industry were used. The statistical population of this research includes all the companies admitted to the Tehran Stock Exchange after applying some restrictions.
Results: The research findings showed a positive and negative relationship between CSR disclosure and accrual, and real earnings management, respectively. Also, the board of directors' independence and institutional ownership have strengthened and weakened the relationship between CSR disclosure and real, accrual earnings management, respectively. In addition, the results of the reverse causality test confirmed the two-way relationship between CSR disclosure and earnings management.
Conclusion: Despite the extensive study of CSR in social science research, the reasons companies engage in CSR activities and spend much capital on it still need to be explained and clarified. This ambiguity can be related to the missing link of earnings management. The results support the research hypotheses and the opportunistic view of management in the Iranian context. For this purpose, the managers used CSR initiatives to manipulate the accrual earnings. However, due to the extensive adverse effects of real earnings management on the company's future performance, managers were less inclined to use this type of earnings management. Also, corporate governance mechanisms have been able to act significantly to moderate these effects. The results of this study carry noteworthy implications for policymakers, managers, and various stakeholders. The findings have significant implications for the stakeholders of different companies, including regulatory authorities, policymakers, developers of the organizational strategy of companies, and academics. Policymakers are advised to reward companies that pursue CSR activities solely for social development while being wary of companies that use CSR activities for covering earnings management. Also, managers can use the results of this research to implement and formulate CSR strategies, which will help them achieve financial transparency when publishing and disclosing the organization's financial information.


Main Subjects

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