Abstract:

The purpose of this study is to examine empirically the simultaneous relationship between corporate social responsibility and earnings management in banking industry. We use two proxies to measure earnings management: loans loss provision and security realized gains and losses. Whereas to measure corporate social responsibility, we use the result of content analysis based on checklist developed using GRI 3.1. We then divided it into strategic component and non-strategic component. The results show that there is a simultaneous relationship between non-strategic corporate social responsibility and earnings management in banking industry, which are mutually positive effect. However, we do not find any simultaneous relationship of strategic corporate social responsibility and earnings management. We only document one direct association only, which is earnings management negatively affect strategic corporate social responsibility, whereas strategic corporate social responsibility does not have any significant association with earnings management.