Can CSR constrain accruals and real earnings management during the COVID-19 pandemic? An international analysis

Hania El-Feel, Diana Mostafa, Hala Amin, Khaled Hussainey

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Purpose – This paper aims to provide insights into the complicated relationship between earnings management and corporate social responsibility during the financial downturn caused by the COVID-19 pandemic.

Design/methodology/approach - Parametric t-tests, non-parametric Wilcoxon rank-sum tests accompanied by ordinary least squares regression analysis, augmented with Newey-West procedure approaches are used for a sample that consists of 1,984 firms from 47 countries for the period of 2014-2020. Earnings Management was proxied once with discretionary accruals using the Modified Jones model (1995), and once with real earnings management using the Roychowdhury model (2006). The study uses ESG scores from the Thomson Reuters database as a proxy for corporate social responsibility.

Findings - The results reveal that firms tend to engage more in earnings management practices during the pandemic and that more socially responsible firms tend to be honest and transparent during the financial reporting process. Interestingly, it is found that more socially responsible firms engaged less in real earnings management practices during the pandemic.

Research limitations/implications - The findings of this research help lenders, investors, policymakers, and managers to gain more understanding of earnings management practices during a negative shock and shed light on the importance of corporate social responsibility in being ethical.

Originality/value - The findings extend both the literature on the role of corporate social responsibility in promoting financial reporting quality and the literature on the impact of COVID-19 on accrual and real earnings management practices.
Original languageEnglish
Number of pages26
JournalJournal of Financial Reporting and Accounting
Early online date11 Oct 2023
Publication statusEarly online - 11 Oct 2023


  • COVID-19
  • earnings management
  • discretionary accruals
  • real earnings management
  • corporate social responsibility

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