Accounting Conservatism and Corporate Social Responsibility

59 Pages Posted: 27 Aug 2020 Last revised: 30 Dec 2020

See all articles by Seraina C. Anagnostopoulou

Seraina C. Anagnostopoulou

University of Piraeus, Department of Banking and Financial Management

Andrianos E. Tsekrekos

Athens University of Economics and Business - Department of Accounting and Finance

Georgios Voulgaris

University of Manchester - Alliance Manchester Business School

Date Written: August 20, 2020

Abstract

We examine the association between accounting conservatism, expressed in the form of asymmetric timeliness of recognition of economic gains and losses, and corporate social responsibility (CSR). We provide evidence that, under unfavorable macroeconomic conditions and financial constraints, as well as increased levels of outside pressure from debt-holders and equity holders, catering for capital providers through conservative reporting becomes a managerial priority over engagement in CSR. Our results overall indicate that, for our whole sample period (starting in the early 2000s), higher levels of conservatism are negatively associated with a CSR orientation shown by firms; however, our analysis also indicates a significant reversing trend regarding the effect of conservatism on CSR, coinciding with the post-financial-crisis period. The findings are robust to a number of specifications and tests, including the use of an instrumental variable approach explicitly addressing endogeneity biases related to reverse causality concerns. Our study suggests that, under monitoring pressure from financial stakeholders, firms prioritize commitment to accounting conservatism over the needs of non-financial stakeholders and other interest groups.

Keywords: accounting conservatism, corporate social responsibility, earnings’ asymmetric timeliness, managerial discretion

JEL Classification: M41, M14, G30

Suggested Citation

Anagnostopoulou, Seraina C. and Tsekrekos, Andrianos E. and Voulgaris, Georgios, Accounting Conservatism and Corporate Social Responsibility (August 20, 2020). British Accounting Review, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3677879 or http://dx.doi.org/10.2139/ssrn.3677879

Seraina C. Anagnostopoulou (Contact Author)

University of Piraeus, Department of Banking and Financial Management ( email )

80 Karaoli & Dimitriou Str.
Piraeus, 18534
Greece

Andrianos E. Tsekrekos

Athens University of Economics and Business - Department of Accounting and Finance ( email )

76 Patission Street
GR-104 34 Athens
Greece

Georgios Voulgaris

University of Manchester - Alliance Manchester Business School ( email )

Booth Street West
Manchester, M15 6PB
United Kingdom

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