DOES CORPORATE SOCIAL RESPONSIBILITY DISCLOSURE CONSTRAIN EARNINGS MANAGEMENT? ACCRUAL AND REAL ACTIVITIES EVIDENCE FROM THE PALESTINE EXCHANGE
DOI:
https://doi.org/10.33102/cgy3wd35Keywords:
Corporate social responsibility disclosure, earnings management, real earnings management, frontier market, Palestine ExchangeAbstract
This study examines whether corporate social responsibility disclosure (CSRD) constrains earnings management through a portfolio-wide governance mechanism or induces substitution from accrual-based to real activities manipulation. Drawing on stakeholder theory, legitimacy theory, and the information asymmetry reduction framework, and using an unbalanced panel of 30 non-financial firms listed on the Palestine Exchange (PEX) over 2013– 2023 (310 firm-year observations), we employ Random Effects GLS estimation with entity- clustered robust standard errors. We find that CSRD is negatively and significantly associated with both accrual-based earnings management (β = −0.079, p = 0.040) and real earnings management (β = −0.215, p = 0.004), with evidence inconsistent with the substitution hypothesis. Sub-index decomposition reveals that human resources and community disclosure dimensions drive the disciplining effect, while environmental disclosure exerts no significant constraint — a pattern consistent with the structure of stakeholder monitoring in a frontier market lacking institutional investor pressure. Findings are directionally consistent across six alternative specifications, including one-period lagged CSRD and first-difference estimation, though the first-difference result does not achieve statistical significance. The results support a compensatory governance interpretation: in the absence of formal monitoring infrastructure, voluntary CSRD assumes a portfolio-wide disciplining role that contradicts the substitution prediction established in developed markets.
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