The role of corporate social responsibility on the link of real earnings management with financial performance and firm value of publicly listed companies in the Philippines

Date of Publication


Document Type

Master's Thesis

Degree Name

Master of Science in Accountancy


Ramon V. Del Rosario College of Business



Thesis Adviser

Rodiel C. Ferrer

Defense Panel Chair

Alger C. Tang

Defense Panel Member

Mark Vincent B. Bendo
Ankiat Byron Co
Brian C. Gozun


Shareholder value maximization is one of the main objectives of a corporation however, the management may not always achieve such an objective that may force them to employ some earnings management practices to manage reported earnings. Earnings management can be opportunistic or efficient depending on the managements intention. This study deals with the opportunistic perspective where managers are suspected to perform some earnings management practices using cash flows from operations (CFO), production costs (PROD) and discretionary expenses (DISEXP), and further utilize their companies Corporate Social Responsibility (CSR) activities to shield the real earnings management (REM) performed. This study investigates primarily the role of CSR on the relationship between REM and financial performance and firm value using Partial Least Square Structural Equation Modeling (PLS-SEM).

It examined 90 publicly listed companies in the Philippines for a five-year period from 2012 to 2016. Real earnings management is evaluated through deviations from normal operations which is termed as abnormal operations.

Results show that the REM of Philippine public companies have given more focus on manipulating cash flows from operations and the CSR of most of the companies used to shield REM is seen to be comprised more of activities and projects that are not sustainable. Further, the study found positive and significant direct association between CSR and REM. As the management of the firm employs more REM, there is a corresponding improvement in the firms CSR activities. Positive and significant direct relationship between CSR and financial performance is also found which can be an inspiration for companies to extend more help and services to the community as it also means improved economic performance.

Another significant finding of this study is the mediating role of CSR on the relationship between REM and financial performance. When the company employs REM and uses CSR to shield such, the significant association between the two causes improvement in the company's financial performance. This study provides evidence of the benefits of using REM to manage company earnings. Employing REM and using CSR (to shield the earnings management performed) benefits not just the community but also serves the economic objectives of the firm. This study concludes that the public companies in the Philippines may have CSR activities on different dimensions and areas however, the intention is not purely to fulfill their social obligations to the community but also to strategically achieve some economic objectives. Corporate social responsibility is used by the management not just to shield REM but also to improve the company's financial performance.

Results of this study call for further studies to address some limitations. Future research may consider including more indicator variables for CSR and firm value, and may also cover accrual-based earnings management and include even non-public companies. The efficient perspective of earnings management may also be explored.

Abstract Format






Accession Number


Shelf Location

Archives, The Learning Commons, 12F Henry Sy Sr. Hall

Physical Description

1 computer disc ; 4 3/4 in.


Social responsibility of business--Philippines; Earnings management--Philippines

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