CORPORATE SOCIAL RESPONSIBILITY, EARNINGS MANAGEMENT AND FINANCIAL PERFORMANCE: EVIDENCE FROM PAKISTANI’S REGISTERED FIRMS

Abstract

This study with the view to fill the gap by conducting a research to know that what impacts CSR has on earning management and financial performance. The meaning of corporate social responsibility (CSR) is to give anything of value other than the core product by the company which is in the favour of society, understanding the actual needs of the society, ensuring workplace safety of employees, employees’ retention and maintaining a clear relationship between the employees and management results in enhanced financial performance in term of profits, committed employees, customer loyalty and increased sale to face a competitive environment. The main aim of this research is to find out the relationship between CSR, earning management and firm’s financial performance in term of employees’ retention, firm reputation and increased profits. The study is quantitative, data collected through questionnaire distributed among the employees and annual reports of different companies on Pakistan Stock exchange, OLS for earning management dummy of 0 and 1 were used to regress the result of DV and IDV of the companies performing business in Pakistan. The Firms’ Financial Performance (FP) is dependent variable while Corporate Social Responsibility (CSR) and Earning Management (EM) are the independent variable of the study. Analysis of the study shows that there is a positive correlation between Earning Management and corporate social responsibility and performance. This means that there is a significant relationship between CSR, EM and Performance revealing impacts that CSR and EM have on performance. The purpose of this study is to observe the relationship between Corporate Social Responsibility (CSR), Earning Management (EM) in firms registered on Pakistan Stock Exchange. The resultant findings of the study expose that Corporate Social Responsibility and EM results in higher financial performance in Firms in PSX.