THE IMPACT OF CORPORATE

SOCIAL RESPONSIBILITIES ON
EARNINGS

MANAGEMENT: EVIDENCE FROM

VIETNAM
JENIFER BRIGITTE GUZMAN CRUZ
Corporate Social Responsibility and Profit Management
 THEORETICAL FRAMEWORK
Corporate Social Responsibility and Profit Management
Corporate social responsibility is a strategic behavior that reflects the
extent to which an entity carries out activities for the common good of
society with compliance with legal requirements (McWilliams & Siegel,
2001; Carroll, 1999)

1 THEY EXTENDED CORPORATE SOCIAL RESPONSIBILITY FROM

TRADITIONAL ECONOMIC AND LEGAL OBLIGATIONS TO 4 CSR INCREASES AGENCY PROBLEMS, MAKING
MANAGERS MORE MOTIVATED TO USE PROFIT
ETHICAL AND PHILANTHROPIC RESPONSIBILITIES MANIPULATION TECHNIQUES TO CONCEAL DEBTS.
THE THEORY OF THREE CONCENTRIC CIRCLES SETS OUT
GUIDELINES AND PRINCIPLES FOR ASSESSING AND REPORTING
2 THE CSR ACHIEVEMENTS OF ENTERPRISES, AND THIS IS ALSO A
SPECIFIC MEASURE FOR THE LEVEL OF CSR COMMITMENT OF 5 . ACCORDING TO THIS THEORY, IMPLEMENTING
CSR REDUCES THE INFORMATION ASYMMETRY
ENTERPRISES (ELKINGTON, 1997; PURIWAT & TRIPOPSAKUL, AMONG BUSINESS PARTNERS (GROUGIOU ET AL.,
2022). 2014), ASSUMING A NEGATIVE RELATIONSHIP
BETWEEN CSR AND EM.
THE STUDIES ON THE LINK BETWEEN CSR AND EM ARE
3 PRETTY RICH, BUT THE RESULTS DIFFER DEPENDING ON
THE THEORIES' PERSPECTIVE. REFERRING TO
STAKEHOLDER THEORY, CSR HAS A POSITIVE IMPACT ON
EARNINGS MANAGEMENT.
 CORPORATE SOCIAL
RESPONSIBILITY AND CEO
CHARACTERISTICS

 Corporate Social Responsibility and CEO Characteristics

an organization's performance, both strategy and CSR, is
reflected by the values and perceptions of the powerful
manager in the organization - the chief executive officer.
CEO observable characteristics such as age,
experience, expertise, and gender can often
be used as indicators for filters based on
their perceptions and values.
* Companies with high CSR reduce the
likelihood of corporate change by the
CEO
* The upper echelons theory argued
that the strategies enacted in joint
stock companies are governed by
the attributes of the CEO

* The more complex, the stronger

the influence of the CEO
characteristics
Changes in CSR in Vietnam in
Recent Years
 Changes in CSR in Vietnam in Recent Years

In 2014, for the first time, corporate social responsibility was included
V
in the Law on enterprises, such as the responsibility of enterprises to
comply with business conditions.

On October 6, 2015, the Ministry of Finance issued Circular 155,

D guiding the disclosure of information on the stock market with
disclosure requirements on social responsibility and has now been
changed and replaced by Circular 96, issued by the Ministry of Finance
on November 16, 2020
 RESEARCH METHODS

Research Database: The study uses a data

sample of all companies listed on the two stock
exchanges of Ho Chi Minh City and Hanoi in the
period 2016 - 2020.
 . AFTER FINDING ALL THE INFORMATION ABOUT THE CEO IN THE ANNUAL REPORT(FOUNDER AND
PROFESSIONAL IN FINANCE - ACCOUNTING) BUT STILL MISSING, THAT OBSERVATION WAS
EXCLUDED FROM THE SAMPLE.

Model 2: DAi = α0 + β1CSRit

Model 1: DAit= α0 +β1CSRit + β2ROAit
*CEOPOWER++ β2ROAit + β3SIZEit +
+β3SIZEit + β4LEVit + £it.
β4LEVit + £it

Where:
- DAit: discretionary accruals estimated by the Modified
Jones Model (Dechow et al., 1995);
- CSR: CSR core obtained from Circular 96 issued by the
Ministry of Finance;
- CSR*CEOPOWER: Corporate social responsibility with CEO
regulation
- SIZE: log of total assets;
- LEV: total liabilities divided by total assets;
- ROA: return on assets;
- α0 is the intercept term;
- β1, β2, β3, β4 are coefficients of regression;
- εit: is the error term.
 MEASURING THE DEPENDENT
VARIABLE IN THE REGRESSION
MODEL

DEPENDENT VARIABLE
 Where, for fiscal year t and firm i, TA represents the total
accruals defined as the difference between earnings and
The authors used Dechow et
operating flows; Ait-1 represents the total assets in t-1, ΔREV
al. (1995) in this study to
is the change in revenues from the preceding year (REVt -
estimate discretionary REVt-1); ΔAR it is the change in net accounts receivables
accruals representing from the prior year, PPE stands for the gross value of
earnings management. property, plant, and equipment.
From there, the non -discretionary accrual is calculated by
substituting the parameters into the corresponding model
and summing each enterprise's discretionary accruals at
each time to be studied through the excel data table
according to the formula

DA it = TA it – NDA it.
 Independent Variables
we use an unweighted method to quantify the CSR disclosure index,
in which each disclosure request item will receive a value of 1 if the
company discloses information such as information in the annual
report or sustainability report. Otherwise, the value is zero. After
determining each point for each standard for each company in each
year, the company's social responsibility index is calculated as
follows:
∑
CSRi = SCOREi / n
Where CSRi is the sum of all the scores received by company i for the
social responsibility aspect divided by the total number of standards
(n = 20). The average calculation of the criteria to determine the
CSR score regarding social responsibility is based on Cavaco & Crifo
(2014).

Controlling Variables
This study includes three variables to control other
factors influencing earnings management (Liu &
Lee, 2019).
THE CONTROLLING VARIABLES ARE SELECTED
BASED ON PRIOR STUDIES.
PREVIOUS STUDIES FOUND A RELATIONSHIP
BETWEEN COMPANY SIZE AND EARNINGS
MANAGEMENT (DECHOW & SKINNER, 2000; BEN
AMAR & CHAKROUN, 2018). ALSO, THIS STUDY
CONTROLS FOR LEVERAGE AND PROPOSES A
NEGATIVE ASSOCIATION BETWEEN LEVERAGE AND
EARNINGS MANAGEMENT. IT IS EXPECTED THAT
COMPANIES WITH HIGH POWER ARE LIKELY TO
DECREASE EARNINGS MANAGEMENT (BÉDARD ET
AL., 2004; (DECHOW & SKINNER, 2000)
RESULTADO EMPÍRICO
Estadísticas descriptivas
Table 1 shows the descriptive statistics for the variable used in the tests. The mean value of
discretionary accruals (DA) is -0.002. The mean value of CSR is 0.527, which implies that, on average,
Vietnamese listed firms have announced more than 50% of social responsibility disclosure targets
according to regulations, with a significant difference between businesses.

Variable definitions: DA= Discretionary accruals estimated by the

modified Jones Model Dechow et al., (1995); CSR = CSR scores obtained
from Circular 96; SIZE = log of total assets; LEV = total liabilities divided
by total assets; ROA = Return on Assets
 Main regression results and test results
Table 2 showed that the absolute value of the pair correlation coefficient between the variables is smaller than 0.7. This showed
that there is no strong correlation between the independent variables. However, to ensure that multicollinearity does not occur
between the variables in the research model. At the same time, this article also tests the variance exaggeration factor (VIF) to
conclude about the problem of multicollinearity collinear. Table 2 showed that the correlation coefficient between the variables
is relatively small, and the factor components in the model for the VIF coefficient are minimal (VIF < 10), showing that the model
does not have a severe multicollinearity line.
 Multiple Regression Analysis

Statistical significance: ***; **; * de note significance at the 1%, 5%,

10% levels, respectively; statistics in brackets [ ]

Multiple Regression Analysis
Regression results of table 3 showed that all 3
models, POOL, FEM, and REM, have F- statistics,
and Wald has Prob value <1%, so all are evaluated
as suitable. The results of selecting FEM and POOL
by the F-test of the two models, respectively, with F
(417, 1668) = 1.14 and F (417, 1668) = 1.12, both
have Prob>F values less than 5%, which is enough
evidence for proving that there are specific
differences between enterprises in the research
model means that the FEM model is the most
suitable.
BASED ON THE FGLS REGRESSION RESULTS IN
TABLE 3, IT SHOWS THAT THE RESPONSIBILITY TO
DISCLOSE INFORMATION OF ENTERPRISES IN TERMS
OF SOCIAL RESPONSIBILITY HAS NEGATIVELY
IMPACTED EARNINGS MANAGEMENT FROM 2016 TO
2020. SPECIFICALLY:
For model 1: CSR has a negative impact at 0.037 at a 5% significance level. This means that the
more information related to social responsibility is disclosed for businesses that implement
CSR by regulations, the lower the earnings management. At the same time, other control
variables also show that the larger the enterprise, the more efficient the operation on total
assets, and the more earnings management tends to increase.
For model 2: CSR*CEO has a negative impact at 0.058 at 5% significance level. This recognizes
that businesses controlled by CEOs with expertise in finance and accounting and are founders
when implementing social responsibility have a higher impact on earnings management and
reduce the earnings management.
.
The results of the above study are entirely consistent with those (Chih et al., 2008; Kim
et al., 2012; Gras-Gil et al., 2016) and are also compatible with ethical theory when it is
recognized that firms that perform activities that contribute to the welfare and
interests of society are less likely to perform earnings management. This is consistent
with the signaling theory, which suggests that the disclosure of CSR information is a
signal to investors and financial markets that managers can control risk, commit to
fulfilling their responsibilities to society (Sun et al., 2010), and reduce information
asymmetry (Grougiou et al., 2014).
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