The Impact of Family Involvement on the Relationship between Corporate Social Responsibility and Earnings Management

The relationship between corporate social responsibility and earnings management is one of the controversial issues in financial and accounting research. Due to significant increase in the number of family firms in emerging economies, many research has been done in this field. The unique characteristics of family firms’ ownership structure such as reputation, family credit, social-emotional wealth, ownership concentration and long-term investment horizon affect the behavior and performance of these companies. Thus, the main purpose of this study is to investigate the impact of family firms on the relationship between corporate social responsibility and earnings management. To achieve this purpose, it was collected data and information from a sample of 119 listed firms in Tehran Stock Exchange for the period of 2011-2017. A panel data approach was used to test the hypotheses of research. The results of the research indicate that family ownership has significant positive and negative relationship with corporate social responsibility and earnings management respectively. The main findings of the research also indicate that family firms weaken and limit the relationship between corporate social responsibility and earnings management. In family firms, the main factor of investing in social responsibility and avoiding earnings management is the attention of family owners to the family reputation, credit and preservation of family social-emotional wealth.