Effects of the Financial Characteristics of Chinese Listed Companies on Earning Management: Focus on CSR (Corporate Social Responsibility)

Purpose: This study analyzed the effects of the financial characteristics of Chinese companies on earnings management, focusing on China's social responsibility activities. Research design, data, and methodology: This study analyzed a company listed on the Shanghai Stock Exchange in China. The CSMAR (China Stock Market & Accounting Research Database) was used as the financial characteristic information data of Chinese companies. The discretionary accruals of the modified John's model were used as a proxy variable for earnings management. The social responsibility activity indicator was analyzed using the social responsibility activity score of RKS (Rankings CSR), a Chinese social responsibility evaluation agency. Results: According t o t he empirical a nalysis, f irst, c orporate e arnings m anagement h as a significant negative (-) effect on the social responsibility activities, and the same result was shown when additional characteristic variables of Chinese companies were added. In addition, both companies with high and low indicators of social responsibility activities had a significant negative (-) effect on profit adjustment. Conclusions: This paper showed that higher accounting transparency, which is a financial characteristic of a company, leads to higher reliability and usefulness of the accounting information provided by the company, so the importance of social responsibility activities indicators for corporate value inventory is increasingly being highlighted.