This study examines whether socially responsible firms behave differently from other firms in their financial reporting. Specifically, we question whether firms that are better in their corporate social responsibility (CSR) performance also behave in a responsible manner to maintain their financial reporting quality and whether the market rewards such responsible behaviors. Using data from S&P 500 US companies, we find that socially responsible firms are less likely to manage their earnings. However, we fail to find significant relationships between CSR and investors’ perceptions on earnings, measured by stock returns and earnings response coefficient. We interpret the results as investors not fully reflecting the benefits from CSR performance. Our findings are consistent with the notion that CSR activities are motivated by managers’ ethical incentives to serve the interests of stakeholders.

There is a debate in academia and the business world on whether tax payments should be considered part of firms’ social responsibility. Existing literature provides conflicting evidence on the relationship between corporate tax payments and corporate social responsibility (CSR). Borrowing a concept from a behavioral theory of the firm (BTOF), this study attempts to present a more refined model on the relationship between the two. The results in this study reveal that as firms’ performance rises further above their aspiration level, they are less likely to show better CSR performances and are also less likely to avoid taxes. Firms performing just above their aspiration level show higher CSR performances and firms performing nearby (both below and above) their aspiration level avoid more taxes. In conclusion, firms’ CSR and tax payment decisions are related to the desire to meet or beat an aspiration level or sustain competitive advantage than being ethical or unethical. JEL CLASSIFICATION M14; H26

Prior research shows that political uncertainty affects general economic and firm-related outcomes. However, little is known about how firm-specific political uncertainty is related to corporate risk-taking. Taking advantage of a recent construct and using a large sample of non-financial U.S. firms covering the period between 2002 and 2021, we find compelling evidence that firm-specific political uncertainty is positively related to corporate risk-taking, especially for larger firms. On average, a one standard deviation rise in the level of political risk at the firm-level results in a 2.53% increase in risk-taking. Further analysis shows that the impact of firm-level political uncertainty on corporate risk-taking is more pronounced for firms that spend more on corporate lobbying. Our results are significant and robust to alternative risk-taking measures and endogeneity tests.

Purpose: This study examines whether and how the quality of financial reporting among US companies changed following the Trump administration’s initial announcement in 2017 to withdraw from the Paris Agreement. Design/methodology/approach: Using a quasi-experimental difference-in-differences (DiD) approach on a sample of 6,406 firm-year observations from S&P 1500 firms, covering the 2015–2020 period, we compare financial reporting quality (FRQ) across carbon-intensive and non-carbon-intensive sectors. Findings: While we do not find a robustly significant difference in FRQ between the two groups prior to the announcement, carbon-intensive firms exhibit a significant relative improvement in the post-announcement period. This indicates that the US withdrawal helped reduce the financial reporting disparity between firms in high-carbon and low-carbon industries. The finding is robust to falsification and parallel trend tests, alternative variable measurements, model specifications, and controls for potential endogeneity. Research limitations/implications: The results suggest that heightened public scrutiny from investors, activists and subnational climate commitments may have outweighed reduced federal regulatory pressure, encouraging carbon-intensive firms to enhance financial reporting transparency. This highlights the role of non-governmental accountability mechanisms in shaping corporate reporting behavior even in deregulatory contexts. Future research should examine real earnings management responses and explore how firm-level governance characteristics mediate these effects. Originality/value: Unlike prior research examining market reactions to the US withdrawal, our study is the first to investigate its impact on FRQ, revealing counterintuitive improvements among carbon-intensive firms and demonstrating heterogeneous corporate responses across sectors with varying environmental exposures.

Carbon emissions have gained media attention and public discussion. Motivated by recent trends and scholarly debate on climate change, this study explores whether firms in carbon-intensive industries exhibit inferior financial reporting quality relative to other sectors and examines how the relationship evolves. Our analysis which used data from US firms for the period between 2006 and 2024 indicates that companies in high-emissions industries engage in more earnings management activities compared to those in other sectors. Interestingly, the discretionary accruals disparity between carbon-intensive and other sectors has diminished over time, while the real earnings management gap persists but narrows. This research adds to the growing body of research examining the impact of climate-related uncertainties on corporate information disclosure.