Listado de contenidos temáticos y desarrollo de la propuesta.

The main purpose of this study is to understand the relationship between EM and QCSRD

among the top 500 Indian listed companies. To achieve the aim of this thesis, the study

hypotheses are built as follows.

In order to explain the association between QCSRD and EM, previous studies have suggested

two perspectives, namely, the moral perspective and the opportunistic perspective (Kim et al.,

2012). The opportunistic perspective suggests that managers who engage in EM are more likely

to use CSR disclosure to mask their opportunistic behaviour (Khan and Azim, 2015).

According to this perspective, CSR disclosure has become an important incentive for managers

to achieve financial gain and personal rewards at the same time. Sun et al. (2010) argued that

when agency conflicts exist, managers might manipulate earnings opportunistically in their

favour. Managers who use EM may attempt to distract stakeholders about their opportunistic

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CSR values, which may or may not be substantiated (Mahoney et al, 2013). Following this

argument, the relationship between EM and CSR reporting could be substitutive, since CSR

disclosure is used by companies with poor financial reporting quality as a mechanism to gain

legitimacy for substitution of their low quality financial reporting (Martínez-Ferrero, et al,

2015). CSR disclosure, in this sense, is used as window-dressing to distract the attention of the

firms’ stakeholders from their questionable and poor financial reporting practice. Owing to this, many empirical studies have shown evidence of a positive association between CSR

disclosure and EM. Nevertheless, according to the moral perspective, it is assumed that

companies which are socially responsible and disclose quality information of their CSR are

less likely to manipulate earnings (Yip et al., 2011). Kim et al. (2012), argue that firms which

spend their resources in the activities of CSR and conduct programs in moral perspective for

the interest of stakeholders are expected to engage less in EM and prepare more reliable and

transparent financial reporting. Choi et al. (2013) point out that since EM is inconsistent with

CSR principles, companies with a higher commitment to CSR are seemingly acting in a

responsible way when they prepare their financial statements. Given that managers are more

likely to engage in EM when there is high information asymmetry, CSR reporting is assumed

by signalling theory to be a means of mitigating the information asymmetry between

management personnel and stakeholders. Owing to this, many empirical studies have shown

evidence of a negative relationship between CSR reporting and EM (e.g. Laksmana & Yang,

2009; Kim et al., 2012).

The above two theoretical perspectives pose an important research question"Is there a positive

or negative relationship between the QCSRD and the level of AEM and REM among Indian listed companies?”. A closer look at the arguments behind these two perspectives, however, reveals that they can be reconciled if one can evaluate the informational content (i.e. quality)

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Furthermore, QCSRD is suggested by signalling and agency theories to be a means of

mitigating EM (Chih et al., 2008). Agency problems arise, and conflicts occur, between

shareholders and managers when the agents act in their own interests rather than optimising

companies’ value (Watts and Zimmerman 1990). Asymmetric information arises when managers have more access to information than the owners (Fields et al. 2001). This is due to

the fact that managers work within the company every day and are informed about all the

companies’ transactions. On the other hand, stakeholders rely on periodic information, such as annual reports, in order to enable them evaluating companies’ value. Therefore, asymmetric information will be higher when the information quality is low.

Signalling and agency theories assume that companies, by providing QCSRD, are more likely

to reduce the asymmetric information and mitigate the problem of conflicting interests (Prado-

Lorenzo et al. 2008; Miller 2002). Agency theory suggests that the problem of conflicting

interests increases when both the managers and shareholders attempt to maximise their wealth.

The key factor that leads to this problem of conflicting interests is asymmetry information.

According to the agency perspective, a company is more likely to use several methods, such as

QCSRD, to mitigate the agency problem between agents and shareholders, and then it reduces

EM (Li et al., 2008). Given that managers are more likely to manipulate earnings with high

information asymmetry, QCSRD is also suggested by signalling theory as a tool for reducing

the asymmetric information between management personnel and stakeholders. Laksmana and

Yang (2009) and Chih et al., (2008) argue that when the transparency of information is

increased the expectation of the asymmetric information between the management and

stakeholders will be reduced and, therefore, EM would be reduced.

The prior research in this area has substantiated that CSR reporting is associated with EM.

Empirical findings, however, remain inconclusive with regard to whether commitment to CSR

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al., 2011; Muttakin & Azim, 2015; Wang et al., 2015; Belgacem & Omri, 2015). One possible

reason for this could be due to the biased measurement of CSR disclosure. The methods of

measuring CSR disclosure that have been employed when examining the relationship with EM

do not consider the QCSRD, which is important for distinguishing the information provided to

users. It is not possible to draw a conclusion on the possible effects of CSR reporting on EM

without knowing whether CSR disclosure conveys true (as in the stakeholder and ethical

perspective) or false information (as in the managerial opportunism or legitimacy perspective).

Since singling and agency theories suggest that the QCSRD could be used to mitigate

information asymmetries (Watts and Zimmerman 1990; Miller 2002), it can be expected that

the QCSRD is useful for various stakeholders and, therefore, comprises a positive phenomenon

for stockmarkets (Garrido et al., 2014).

Chih et al., (2008) argue that it will be unlikely that managers will engage in EM in companies

that provide high quality disclosure of their social activities which targets all stakeholders

because, when the transparency of information is increased, the expectation of the information

asymmetry among management and stakeholders will be reduced. Since the reduction in

information asymmetry tends to constrain EM (Wang et al, 2015), the current study expects a

negative relationship between QCSRD and EM and, thus, supports the first and second

hypotheses:

H1: there is a negative relationship between AEM and QCSRD.

H2: there is a negative relationship between REM and QCSRD.