The Relationship Between Social Responsibility Reportand Real Earning Management

In recent years, the authenticity of accounting information in capital market hasbecome a heated issue considering continuous accounting scandals. The reason of thephenomenon could be concluded as the earning management of many enterprises,which not only misleads the investors and effects the decisions of investors, but alsodisturbs the market order and brings negative influences on optimal allocation of themarket resources. Social responsibility has gained more concerning from the public andbecomes a necessary trend for the sustainable development of enterprises since muchattention has been paid on environment and rights.Earning management has been regarded as a kind of lacking of business ethics,which is a kind of lacking of social responsibilities fundamentally. In this way,enterprises that perform well in social responsibility have the ability of balancing thebenefits of different stakeholders and a complete company structure, which leads to anearning management in low levels. In other words, the performance of social duties mayhave an effect on the earning management of enterprises. However, according to somescholars, on the basis of signaling theory, the performance of social duties could coverearning management to some extent since the enterprises would undertake someresponsibilities voluntarily and gain the trust of investors by showing the socialresponsibility report to the public in order to improve enterprise reputation and convey apositive signal to the society. That is to say the social responsibility has covered upearning management. As for the performance of social responsibility, the release, qualityand authentication of social responsibility report could be good standards. In order toresearch the relationship between social responsibility and real earning management,relative statistics of listed enterprises are analyzed in this thesis. Firstly, the relationshipbetween social responsibility report and real earning management is researched. Then afurther research is done to test the relationship between the quality of socialresponsibility report and real earning management among the enterprises that release thereports. Finally, the relationship between the authentication of the reports and realearning management is analyzed. Thus, the relationship between the report and realearning management is completely analyzed step by step. Nowadays, enterprises wouldmake their real earning management in a hidden way, which could be a new idea inregulating enterprise real earning management. What’s more, it is helpful to rouse the awareness of social responsibility and disclose the social responsibility report as well asits authentication, which brings much positive influences on the sound development,optimal allocation of resources and operational efficiency of the capital market.Relative references of social responsibility and real earning management areconsulted in this thesis in order to confirm the relativity between earning managementon the basis of accounting information and social responsibility report on the basis ofnon-accounting information. Then relative theory is listed in this thesis such asprincipal-agent theory, stakeholder theory, signaling theory and social responsibilitytheory, according to which a hypothesis of empirical research is proposed. In this thesis,3742A-share listed companies in China are selected for researching the relationshipbetween social responsibility and real earning management from the respective ofperformance of social duties. Three hypotheses are proposed in order to analyze theperformance of social duties. Considering the particularity of state-owned companies inChina, further research about the relationship between social responsibility report andreal earning management of state-owned enterprises and non state-owned enterprises isled in this thesis. The conclusion is set up after the testing of conservation. It would befound that the release of social responsibility report does have some control on realearning management and the quality of social responsibility report has a negativecorrelation to real earning management while the correlation between the authenticationof social responsibility report and real earning management is not that notable.Finally, it can be concluded from the results of empirical multiple linear regressionthat the social responsibility report has a negative correlation with real earningmanagement and social responsibility does have a control on earning management,which is helpful to the control of earning management in enterprises and promotion ofthe performance of social responsibility, release and authentication of the socialresponsibility report.