Corporate Social Responsibility and the Misclassification of Income Statement Items during the Coronavirus Pandemic

The purpose of this study was to examine the relationship between corporate social responsibility (CSR) and earnings management in Gulf Cooperation Council (GCC)-listed companies. It specifically addresses the question of whether companies that practice greater corporate social responsibility are le...

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Bibliographic Details
Published in:Journal of risk and financial management 2024-09, Vol.17 (9), p.392
Main Authors: Sanad, Zakeya, Al Lawati, Hidaya, Al-Sartawi, Abdalmuttaleb
Format: Article
Language:English
Subjects:
Bahrain
Coronaviruses
Corporate social responsibility
COVID-19
Disease transmission
Earnings management
Epidemics
Financial statements
International Financial Reporting Standards
Kuwait
Oman
Pandemics
Saudi Arabia
Social aspects
Social responsibility
Strategic planning (Business)
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Summary:The purpose of this study was to examine the relationship between corporate social responsibility (CSR) and earnings management in Gulf Cooperation Council (GCC)-listed companies. It specifically addresses the question of whether companies that practice greater corporate social responsibility are less likely to engage in earnings management practices. The study sample consisted of 300 firms listed between 2015 and 2021 on GCC bourses (Saudi Arabia, United Arab Emirates, Bahrain, Qatar, Oman, and Kuwait). In this study, we developed multiple linear regression models and collected data from the Bloomberg database, Refinitiv, annual reports, official firms’ websites, and the GCC’s bourse websites for the period from 2015 to 2021. In the pre-pandemic period, firms that engaged in corporate social responsibility activities were more likely to have fewer classification-shifting practices. During the pandemic era, however, this relationship became significantly positive, suggesting that firms’ corporate social responsibility practices may be used to hide their opportunistic classification-shifting practices during difficult times, such as a pandemic. This paper presents a thorough investigation of how businesses may alter their behavior toward increasingly applied but understudied earnings management strategies and CSR practices during a difficult period such as a pandemic.
ISSN:1911-8074
1911-8066
1911-8074
DOI:10.3390/jrfm17090392