EARNINGS MANAGEMENT AND ITS RELATIONS WITH CORPORATE SOCIAL RESPONSIBILITY

The ethics of financial reporting assumes a center stage in the corporate world in the background of an emerging understanding of corporate social responsibility (CSR). We review the literature on the link between earnings management (EM) and CSR and reveal that there are two contradictory perspectives. One perspective assumes that EM is negatively associated to CSR, while the other argues that EM and CSR are positively related. These perspectives are based on the competitive existence theories such as agency, singling, stakeholder, legitimacy theories. While, the negative relationship between EM and CSR perspective is in line with the legitimacy, agency and singling theories, the positive relationship is in accordance with stakeholder theory.Key words: earnings management, corporate social responsibility, stakeholder theory, legitimacy theory, agency theor