تاثیر کنترل سهامداران بر رابطه بین CSR و کیفیت سود: شرکت های چینی Are Controlling Shareholders Influencing the Relationship Between CSR and Earnings Quality? Evidence from Chinese Listed Companies

1. Introduction Is earning quality likely to be higher or lower at companies with a higher level of corporate social responsibility (CSR)? The level of CSR is a measurement of socially responsible activities by companies that benefit stakeholders overall (Kim et al., 2012), such as increasing customers reliability and reducing pollution. Prior research has had conflicting results. For example, Kim et al. (2012), by using the global data from 2001 to 2009, suggest that companies with a higher level of CSR tend to have better earnings quality because they reduce their manipulation of earnings and deliver higher-quality financial information in a responsible manner. In contrast, Jensen and Meckling (1976) argue that managers of companies with a higher level of CSR work to pursuit self-interest or improve the firm’s reputation, at such firms, so earnings quality tends to decline, but so does manipulation of financial reporting. One possible reason for this apparent contradiction is that certain factors may affect the relationship between having a high level of CSR and earnings quality, such as the extent to which the managers restrict the manipulation of reported earnings. For example, Choi et al. (2013) and Sun et al. (2010) find that the relationship between the level of CSR and earnings quality is weaker when a firm’s percentage of institutional investors increases, whereas the relationship is stronger when the firm’s percentage of foreign investors increases. In China, Zhong and Fan (2011) examine the relationship between the level of CSR and the scale of earnings manipulation, demonstrating that companies with a higher level of CSR have more transparency and less earnings manipulation. Controlling shareholders play an important role in earnings quality (Wang 2013). The earnings quality is lower at state-owned enterprises (SOEs) than at private owned firms (POEs). However, POEs have a higher quality of earnings than SOEs listed on the S&P 500 stock index (Ali et al. 2007). In China, Xia and Fang (2005) show that enterprises controlled by the central government (CGCEs), enterprises controlled by local governments (LGCEs), and POEs are driven by different layers of local governments, such as provincial government, municipal government and county government. Therefore, companies that have different controlling shareholders will display different corporate behavior for different potential interests.