TY - JOUR
T1 - Accounting conservatism and corporate social responsibility
AU - Guo, Jun
AU - Huang, Pinghsun
AU - Zhang, Yan
N1 - Funding Information:
The authors gratefully acknowledge the insightful suggestions of Dennis Caplan (the Editor), Qiang Wu (the Associate Editor) and two anonymous reviewers from the journal. We also appreciate the constructive comments received from participants and discussants at the 2013 American Accounting Association Annual Meeting at Anaheim, CA and the 2012 American Accounting Association Northeast Region meeting at Providence, RI.
PY - 2020/12
Y1 - 2020/12
N2 - In this paper, we examine whether a firm's stakeholder orientation, as manifested by its social responsibility endeavors, matters for its choice of accounting conservatism. We find that the level of conservatism in financial reporting significantly increases with socially responsible activities. This result is robust to several conservatism aspects, including market-based conservatism measure, the aggregate of R&D reserves, advertising reserves, and LIFO reserves, and accrual-based conservatism construct. Moreover, our two-stage regression results validate that conservatism is more pronounced for firms that devote more resources to social responsibility programs. Consistent with stakeholder theory, these findings indicate that CSR-oriented firms are more likely to use accounting conservatism to credibly commit to acting in the interests of stakeholders. As a whole, our results provide a novel implication that the extent of accounting conservatism can be entailed by a firm's efforts to enhance stakeholder relations.
AB - In this paper, we examine whether a firm's stakeholder orientation, as manifested by its social responsibility endeavors, matters for its choice of accounting conservatism. We find that the level of conservatism in financial reporting significantly increases with socially responsible activities. This result is robust to several conservatism aspects, including market-based conservatism measure, the aggregate of R&D reserves, advertising reserves, and LIFO reserves, and accrual-based conservatism construct. Moreover, our two-stage regression results validate that conservatism is more pronounced for firms that devote more resources to social responsibility programs. Consistent with stakeholder theory, these findings indicate that CSR-oriented firms are more likely to use accounting conservatism to credibly commit to acting in the interests of stakeholders. As a whole, our results provide a novel implication that the extent of accounting conservatism can be entailed by a firm's efforts to enhance stakeholder relations.
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U2 - 10.1016/j.adiac.2020.100501
DO - 10.1016/j.adiac.2020.100501
M3 - Article
AN - SCOPUS:85096187072
VL - 51
JO - Advances in Accounting
JF - Advances in Accounting
SN - 0882-6110
M1 - 100501
ER -