This study examines how corporate social performance (CSP) differs between companies that restate their financial statements and companies that do not. Using a sample of 44 U.S. companies that restated financials and matched non-restating companies, the researchers found:
1) CSP strengths, weaknesses, and people dimensions increased more after restatements, though weaknesses increased more than strengths.
2) Restating companies saw greater increases in CSP measures and decreases in people CSP than non-restating companies post-restatement.
3) The relationship between financial performance and CSP strengths was stronger for restating than non-restating companies, driven by people CSP strengths.
This study examines the relationship between corporate social performance (CSP) and corporate financial performance (CFP) for 383 companies in Indonesia over 2002-2003. Specifically, it analyzes whether company size and industry affect the CSP-CFP relationship. Content analysis was used to measure CSP based on dimensions like community, diversity, environment, and products. Financial data came from annual reports. The study aims to add to literature on developing countries and examine the impact of moderating variables on the CSP-CFP relationship. Hypotheses are that the relationship is positive and moderated by size and industry.
This document discusses how ownership influences business growth through competitive actions. It argues that private owners (both foreign and local) are better able to employ aggressive competitive actions to grow business than state owners. Firms with multiple owners, like international joint ventures, are less able to implement actions that drive growth compared to full ownership. The paper finds support for these arguments in a study of 106 firms in China, showing the principal-principal perspective better explains governance and competition in emerging markets than the principal-agent perspective.
Corporate Governance And Earnings Management In Latin American Marketsjesaenz
This document summarizes a research paper that examines the relationship between corporate governance mechanisms and earnings management in Latin American markets. The researchers analyze how factors like board size, ownership structure, and government effectiveness impact earnings management. They find that larger boards are less effective at oversight and increase earnings manipulation. Ownership concentration and more frequent board meetings reduce manipulation. Countries with lower corruption and stronger rule of law also have less earnings management. This study contributes to understanding how corporate governance impacts financial reporting quality in emerging markets.
This document examines factors that determine capital structure decisions of publicly traded U.S. firms. It finds that the most reliable factors positively associated with leverage are median industry leverage, firm size, intangible assets, and collateral, while the most reliable negative factors are bankruptcy risk, dividend paying status, market-to-book ratio. Less reliably but still generally supported are positive relationships with growth, tax rates, and interest rates, and negative relationships with stock return volatility, net operating losses, profits, and financial constraints.
This study examines the link between corporate governance and employment policies in Russian firms between 1997-2004. The researchers estimate a proxy for private benefits of control using a voting premium model. They then relate this proxy to labor market outcomes like wages and wage arrears. They find wages are higher and arrears lower in firms with more severe governance problems, suggesting expropriation of shareholders implies more generous worker policies. However, this only holds when ownership is dispersed, not when a majority owner controls the firm.
Advantages and disadvantages of going public and becoming a listed companysurrenderyourthrone
This document discusses the advantages and disadvantages of companies going public and becoming listed companies. Some key advantages of going public mentioned include gaining access to public capital markets for funding, enhanced ability to borrow and raise equity in the future, increased liquidity and valuation of shares, and increased prestige. However, the document also notes several disadvantages such as high costs of the IPO process, increased disclosure and reporting requirements, loss of some control, and pressure to maintain growth. Empirical evidence presented finds that post-IPO financial performance often declines for companies in countries like Italy, the UK, and Saudi Arabia. Alternatives to IPOs discussed include private placements, debt instruments, and stock buybacks.
The document summarizes an instrumental theory of social and environmental accounting (SEA) at the organizational and societal levels of analysis. At the organizational level, the effectiveness of SEA is measured by whether it maximizes the firm's utility by setting the level of SEA where marginal costs equal marginal benefits. At the societal level, effectiveness is measured by the level of SEA that achieves the greatest social efficiency by maximizing aggregate societal well-being relative to costs. The paper then analyzes potential benefits and costs of SEA based on signaling theory and transaction cost economics for both reporting organizations and stakeholders. It concludes by discussing how political governance systems may influence SEA and provides suggestions for future research.
This study examines the relationship between corporate social performance (CSP) and corporate financial performance (CFP) for 383 companies in Indonesia over 2002-2003. Specifically, it analyzes whether company size and industry affect the CSP-CFP relationship. Content analysis was used to measure CSP based on dimensions like community, diversity, environment, and products. Financial data came from annual reports. The study aims to add to literature on developing countries and examine the impact of moderating variables on the CSP-CFP relationship. Hypotheses are that the relationship is positive and moderated by size and industry.
This document discusses how ownership influences business growth through competitive actions. It argues that private owners (both foreign and local) are better able to employ aggressive competitive actions to grow business than state owners. Firms with multiple owners, like international joint ventures, are less able to implement actions that drive growth compared to full ownership. The paper finds support for these arguments in a study of 106 firms in China, showing the principal-principal perspective better explains governance and competition in emerging markets than the principal-agent perspective.
Corporate Governance And Earnings Management In Latin American Marketsjesaenz
This document summarizes a research paper that examines the relationship between corporate governance mechanisms and earnings management in Latin American markets. The researchers analyze how factors like board size, ownership structure, and government effectiveness impact earnings management. They find that larger boards are less effective at oversight and increase earnings manipulation. Ownership concentration and more frequent board meetings reduce manipulation. Countries with lower corruption and stronger rule of law also have less earnings management. This study contributes to understanding how corporate governance impacts financial reporting quality in emerging markets.
This document examines factors that determine capital structure decisions of publicly traded U.S. firms. It finds that the most reliable factors positively associated with leverage are median industry leverage, firm size, intangible assets, and collateral, while the most reliable negative factors are bankruptcy risk, dividend paying status, market-to-book ratio. Less reliably but still generally supported are positive relationships with growth, tax rates, and interest rates, and negative relationships with stock return volatility, net operating losses, profits, and financial constraints.
This study examines the link between corporate governance and employment policies in Russian firms between 1997-2004. The researchers estimate a proxy for private benefits of control using a voting premium model. They then relate this proxy to labor market outcomes like wages and wage arrears. They find wages are higher and arrears lower in firms with more severe governance problems, suggesting expropriation of shareholders implies more generous worker policies. However, this only holds when ownership is dispersed, not when a majority owner controls the firm.
Advantages and disadvantages of going public and becoming a listed companysurrenderyourthrone
This document discusses the advantages and disadvantages of companies going public and becoming listed companies. Some key advantages of going public mentioned include gaining access to public capital markets for funding, enhanced ability to borrow and raise equity in the future, increased liquidity and valuation of shares, and increased prestige. However, the document also notes several disadvantages such as high costs of the IPO process, increased disclosure and reporting requirements, loss of some control, and pressure to maintain growth. Empirical evidence presented finds that post-IPO financial performance often declines for companies in countries like Italy, the UK, and Saudi Arabia. Alternatives to IPOs discussed include private placements, debt instruments, and stock buybacks.
The document summarizes an instrumental theory of social and environmental accounting (SEA) at the organizational and societal levels of analysis. At the organizational level, the effectiveness of SEA is measured by whether it maximizes the firm's utility by setting the level of SEA where marginal costs equal marginal benefits. At the societal level, effectiveness is measured by the level of SEA that achieves the greatest social efficiency by maximizing aggregate societal well-being relative to costs. The paper then analyzes potential benefits and costs of SEA based on signaling theory and transaction cost economics for both reporting organizations and stakeholders. It concludes by discussing how political governance systems may influence SEA and provides suggestions for future research.
Aloke Ghosh Speaks at Fox Business School, Temple University, PhiladelphiaProfessorAlokeGhosh
- The document examines the relationship between accounting losses/profits and CEO turnover.
- Using a sample of S&P 1500 firms from 1997-2007, it finds losses significantly increase the likelihood of CEO turnover within two years, with the probability increasing further based on the magnitude of the loss.
- Notably, it finds that accounting performance measures are no longer important predictors of turnover once an indicator for losses is included, suggesting losses dominate as a metric for judging managerial competence.
This document summarizes recent literature on CEO compensation. It finds that CEO pay has risen rapidly over the past 30 years, with median pay among S&P 500 CEOs increasing from $2.3 million in 1992 to a peak of $7.2 million in 2001. This growth is driven by both rising pay levels across firms of all sizes, as well as a shift toward stock options and equity-based compensation. While some argue high pay is optimal, others argue it reflects rent extraction by powerful CEOs. The literature finds evidence for both views but neither fully explains patterns in the data. Future research on exogenous changes may help distinguish between the two perspectives.
UnumProvident Corporation reported a net loss for Q3 2006 due to an increase in reserves for claims reopened under regulatory settlements. Excluding these additional reserves and realized investment gains/losses, income was up 17% from Q3 2005. Both the Unum Limited and Colonial segments achieved record earnings. The U.S. Brokerage segment's group income protection line showed improved trends excluding additional reserves, while other lines like group life grew earnings. UnumProvident also announced a successful securitization of long-term income protection claim reserves that enhanced its capital position.
Stuart Briers - Undergraduate Research PaperStuart Briers
This document is a student paper that analyzes how firm size affected capital structure and leverage during the 2007-2009 US Financial Crisis. It hypothesizes that firm size is the most important determinant of leverage. The paper reviews literature on the relationship between firm size and leverage. It finds mixed evidence, with some studies finding a positive relationship for large firms and negative for small firms. The paper will test the Pecking Order Theory which predicts that firms prioritize retained earnings over debt or equity. It will analyze 1,200 US firms to determine the impact of various factors like size, profitability, and growth on leverage during the Financial Crisis period.
Abrutyn and turner. taxes and firms'dividend policies survey resultsMurtaza Khan
This survey asked CEOs directly about factors influencing their firms' dividend payout policies. The survey results cast doubt on tax-based explanations, as only 42% of firms knew their shareholders' tax statuses. Of those, an average of only 25% of stock was held by shareholders facing high tax rates. Signaling was seen as important by 63% of respondents. The survey provides some support for signaling and agency cost theories of dividends but casts doubt on the clientele and tax capitalization hypotheses. In general, the survey suggests taxes play a limited role in firms' dividend policies.
This document discusses a study on the determinants of capital structure for agriculture sector firms in India. It finds that return on net worth, non-debt tax shield, profitability, and growth are positively related to financial leverage for these firms. Meanwhile, return on capital employed, interest cover ratio, collateralizable value of assets, and size are negatively related to financial leverage. The study uses correlation and regression analysis of data from 18 agriculture sector firms over 9 years to analyze the relationships between leverage and various firm-specific determinants.
Dividend Policy and Bank Performance in GhanaSamuel Agyei
This document summarizes a study on the relationship between dividend policy and bank performance in Ghana. The study analyzed financial statements from 16 commercial banks in Ghana from 1999-2003. The results showed that on average, banks paid out 24.65% of their earnings as dividends. Banks that paid dividends had higher performance. Factors like leverage, size, and growth were also found to enhance bank performance. While some prior studies found dividend policy irrelevant to firm value, this study provides further evidence that dividend policy impacts bank performance in Ghana.
The document provides a letter from the Chairman of Interpublic Group to shareholders summarizing the company's performance in 2003 and outlining plans for the future.
The key points are:
1) 2003 was a year of transition as Interpublic stabilized the company and began a turnaround, though financial results were disappointing due to restructuring charges.
2) Significant progress was made strengthening the balance sheet and improving financial accountability.
3) Restructuring efforts improved margins and the company is on track to achieve margin targets.
4) Initiatives to boost organic growth and recruit top talent showed early success and will be important drivers of future performance.
5) Interpublic is well positioned to capital
11.concentrated share ownership and financial performance of listed companies...Alexander Decker
This document summarizes previous research on the relationship between concentrated share ownership and financial performance of listed companies. It discusses how agency theory suggests that concentrated ownership can improve performance by reducing agency costs through increased monitoring of managers. However, other research has found potential negative effects of concentrated ownership through manager entrenchment. The document reviews mixed findings in previous empirical studies conducted primarily in developed countries. It argues there is a need for more research in emerging markets like Ghana due to differences in business contexts. The main objective of the study described is to analyze the relationship between share concentration and performance of listed firms on the Ghana Stock Exchange.
Concentrated share ownership and financial performance of listed companies in...Alexander Decker
This document summarizes a research study that examined the effect of share ownership concentration on the financial performance of listed companies in Ghana. The study used panel data regression analysis to measure performance using Tobin's Q and return on assets, and analyzed the relationship between these performance metrics and ownership concentration, institutional ownership, and insider ownership. The results found statistically significant relationships, suggesting that concentrated ownership, institutional ownership, and insider ownership are positively associated with higher financial performance of companies on the Ghana Stock Exchange. The study concludes that Ghanaian ownership is heavily concentrated and that concentrated structures should be encouraged to improve monitoring and performance.
UnumProvident Corporation reported financial results for the fourth quarter of 2006. Net income was $276.1 million, compared to $137.5 million in the fourth quarter of 2005. Operating trends improved in the Unum US, Unum UK, and Colonial segments. Kevin McCarthy was named president of Unum US and Robert Best was named chief operating officer. The company also announced the pending sale of its GENEX Services subsidiary and reaffirmed 2007 operating earnings per share guidance.
Post privatization Corporate Governance and the challenges of working capital...inventionjournals
The document discusses corporate governance and working capital challenges in Nigeria after privatization. It examines the impact of corporate governance proxies like ownership structure, board characteristics, and privatization on the liquidity ratio of Ashaka Cement Company. Trend analysis found the liquidity ratio was generally higher before privatization but declined significantly at times due to economic issues. Regression analysis suggests some corporate governance factors like minority ownership and privatization had a positive impact on liquidity ratio, while others like non-executive directors and market value had a negative impact. The study concludes corporate governance significantly impacts liquidity ratio but macroeconomic environment also influences company efficiency.
Unum Group reported financial results for the third quarter of 2008. While net income was $108.0 million, this included realized investment losses of $108.9 million. Excluding these losses, after-tax income was $216.9 million. The group disability benefit ratio continued trending downward. Across segments, Unum US saw increases in operating income for disability and voluntary lines, while UK saw a decrease in operating income of 4.9% compared to the prior year. Overall the company demonstrated continued strong performance across core segments and a strong capital position is being maintained despite challenges in the current economic environment.
Dear student, Warm Greetings of the Day!!! We are a qualified team of consultants and writers who provide support and assistance to students with their Assignments, Essays and Dissertation. If you are having difficulties writing your work, finding it stressful in completing your work or have no time to complete your work yourself, then look no further. We have assisted many students with their projects. Our aim is to help and support students when they need it the most. We oversee your work to be completed from start to end. We specialize in a number of subject areas including, Business, Accounting, Economic, Nursing, Health and Social Care, Criminology, Sociology, English, Law, IT, History, Religious Studies, Social Sciences, Biology, Physic, Chemistry, Psychology and many more. Our consultants are highly qualified in providing the highest quality of work to students. Each work will be unique and not copied like others. You can count on us as we are committed to assist you in producing work of the highest quality. Waiting for your quick response and want to start healthy long term relationship with you. Regards http://www.cheapassignmenthelp.com/ http://www.cheapassignmenthelp.co.uk/
Market Orientation, Firms’ Level Characteristics and Environmental Factors: I...IOSR Journals
The study assesses the effect of firms’ level characteristics, market orientation and environmental factors on the influence of e-commerce competence development on organizations’ performance. Data were drawn from 130 managers from a population of 193 managers of all the airline firms in the industry. Partial correlation coefficient was used to test the moderating effect of variables of study. The result shows that firms’ level characteristics and proactive market orientation moderate the influence of e-commerce competence development on organizational performance. Based on these findings, we conclude that certain market culture and firms’ level characteristics affect the influence of e-commerce competence on performance. We therefore recommend that e-commerce firms should anticipate latent needs by offering technological advances that enables them to lead customers to new and better value proposition and satisfaction.
A critical analysis of equity ownership structure on firm’s performanceAlexander Decker
This document summarizes a research study on the relationship between equity ownership structure and firm performance of publicly listed companies in Kenya. It discusses how ownership concentration and identity can influence corporate governance and potentially affect performance. The study is based on agency, stewardship, and stakeholder theories. It reviews literature showing mixed results on the effects of state ownership, institutional ownership, and other ownership types on firm value and performance. The objective is to analyze how controlling shareholder identity influences performance of listed Kenyan companies.
11.mahoney.et al 0104www.iiste.org call for_paper-130Alexander Decker
This study examines the relationship between corporate social performance (CSP) and financial performance (FP) for firms that restate their financial statements compared to firms that do not restate. Using a sample of 44 U.S. firms, the study finds that after a restatement, CSP strengths, weaknesses, and people dimensions increased more for restating firms than non-restating firms. Additionally, the positive relationship between return on assets and CSP strengths was stronger for restating firms. In particular, this relationship was driven by CSP people strengths.
This study examines the relationship between institutional ownership (IO) and corporate social performance (CSP) for Indonesian companies. Prior research on companies in North America and Europe found a positive relationship between IO and CSP, but this relationship has not been investigated for Indonesian companies. The study uses a CSP index developed by Jantzi Research Inc. to measure CSP based on social and environmental disclosures in annual reports. Institutional ownership is measured by the number of institutions owning shares in a company. The results of the analysis of 324 Indonesian companies found no significant relationship between institutional ownership and CSP. This suggests that institutional investors in Indonesia do not include CSP in their investment decisions.
This study examines the relationship between institutional ownership (IO) and corporate social performance (CSP) for Indonesian companies. Prior research on companies in North America and Europe found a positive relationship between IO and CSP, but this relationship has not been investigated for Indonesian companies. The study uses a CSP index developed by Jantzi Research Inc. to measure CSP based on social and environmental disclosures in annual reports. Institutional ownership is measured by the number of institutions owning shares in a company. The study controls for financial performance, firm size, and industry. The results found no significant relationship between institutional ownership and CSP for Indonesian companies, suggesting institutional investors do not consider CSP in their investment decisions for these companies.
The Effect of Capital Structure on Profitability of Energy American Firms:inventionjournals
International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online.
Effect of corporate social responsibility information disclosure on financial...Alexander Decker
This study analyzed the effect of corporate social responsibility (CSR) information disclosure on financial performance and firm value in banking companies listed on the Indonesia Stock Exchange between 2008-2011. The study found that CSR disclosure positively affected three measures of financial performance (return on assets, return on equity, return on sales) and firm value as measured by Tobin's Q. Additionally, return on assets and return on equity positively influenced firm value, but return on sales did not. The study used quantitative methods including descriptive analysis and path analysis to test the relationships between CSR disclosure, financial performance, and firm value.
Aloke Ghosh Speaks at Fox Business School, Temple University, PhiladelphiaProfessorAlokeGhosh
- The document examines the relationship between accounting losses/profits and CEO turnover.
- Using a sample of S&P 1500 firms from 1997-2007, it finds losses significantly increase the likelihood of CEO turnover within two years, with the probability increasing further based on the magnitude of the loss.
- Notably, it finds that accounting performance measures are no longer important predictors of turnover once an indicator for losses is included, suggesting losses dominate as a metric for judging managerial competence.
This document summarizes recent literature on CEO compensation. It finds that CEO pay has risen rapidly over the past 30 years, with median pay among S&P 500 CEOs increasing from $2.3 million in 1992 to a peak of $7.2 million in 2001. This growth is driven by both rising pay levels across firms of all sizes, as well as a shift toward stock options and equity-based compensation. While some argue high pay is optimal, others argue it reflects rent extraction by powerful CEOs. The literature finds evidence for both views but neither fully explains patterns in the data. Future research on exogenous changes may help distinguish between the two perspectives.
UnumProvident Corporation reported a net loss for Q3 2006 due to an increase in reserves for claims reopened under regulatory settlements. Excluding these additional reserves and realized investment gains/losses, income was up 17% from Q3 2005. Both the Unum Limited and Colonial segments achieved record earnings. The U.S. Brokerage segment's group income protection line showed improved trends excluding additional reserves, while other lines like group life grew earnings. UnumProvident also announced a successful securitization of long-term income protection claim reserves that enhanced its capital position.
Stuart Briers - Undergraduate Research PaperStuart Briers
This document is a student paper that analyzes how firm size affected capital structure and leverage during the 2007-2009 US Financial Crisis. It hypothesizes that firm size is the most important determinant of leverage. The paper reviews literature on the relationship between firm size and leverage. It finds mixed evidence, with some studies finding a positive relationship for large firms and negative for small firms. The paper will test the Pecking Order Theory which predicts that firms prioritize retained earnings over debt or equity. It will analyze 1,200 US firms to determine the impact of various factors like size, profitability, and growth on leverage during the Financial Crisis period.
Abrutyn and turner. taxes and firms'dividend policies survey resultsMurtaza Khan
This survey asked CEOs directly about factors influencing their firms' dividend payout policies. The survey results cast doubt on tax-based explanations, as only 42% of firms knew their shareholders' tax statuses. Of those, an average of only 25% of stock was held by shareholders facing high tax rates. Signaling was seen as important by 63% of respondents. The survey provides some support for signaling and agency cost theories of dividends but casts doubt on the clientele and tax capitalization hypotheses. In general, the survey suggests taxes play a limited role in firms' dividend policies.
This document discusses a study on the determinants of capital structure for agriculture sector firms in India. It finds that return on net worth, non-debt tax shield, profitability, and growth are positively related to financial leverage for these firms. Meanwhile, return on capital employed, interest cover ratio, collateralizable value of assets, and size are negatively related to financial leverage. The study uses correlation and regression analysis of data from 18 agriculture sector firms over 9 years to analyze the relationships between leverage and various firm-specific determinants.
Dividend Policy and Bank Performance in GhanaSamuel Agyei
This document summarizes a study on the relationship between dividend policy and bank performance in Ghana. The study analyzed financial statements from 16 commercial banks in Ghana from 1999-2003. The results showed that on average, banks paid out 24.65% of their earnings as dividends. Banks that paid dividends had higher performance. Factors like leverage, size, and growth were also found to enhance bank performance. While some prior studies found dividend policy irrelevant to firm value, this study provides further evidence that dividend policy impacts bank performance in Ghana.
The document provides a letter from the Chairman of Interpublic Group to shareholders summarizing the company's performance in 2003 and outlining plans for the future.
The key points are:
1) 2003 was a year of transition as Interpublic stabilized the company and began a turnaround, though financial results were disappointing due to restructuring charges.
2) Significant progress was made strengthening the balance sheet and improving financial accountability.
3) Restructuring efforts improved margins and the company is on track to achieve margin targets.
4) Initiatives to boost organic growth and recruit top talent showed early success and will be important drivers of future performance.
5) Interpublic is well positioned to capital
11.concentrated share ownership and financial performance of listed companies...Alexander Decker
This document summarizes previous research on the relationship between concentrated share ownership and financial performance of listed companies. It discusses how agency theory suggests that concentrated ownership can improve performance by reducing agency costs through increased monitoring of managers. However, other research has found potential negative effects of concentrated ownership through manager entrenchment. The document reviews mixed findings in previous empirical studies conducted primarily in developed countries. It argues there is a need for more research in emerging markets like Ghana due to differences in business contexts. The main objective of the study described is to analyze the relationship between share concentration and performance of listed firms on the Ghana Stock Exchange.
Concentrated share ownership and financial performance of listed companies in...Alexander Decker
This document summarizes a research study that examined the effect of share ownership concentration on the financial performance of listed companies in Ghana. The study used panel data regression analysis to measure performance using Tobin's Q and return on assets, and analyzed the relationship between these performance metrics and ownership concentration, institutional ownership, and insider ownership. The results found statistically significant relationships, suggesting that concentrated ownership, institutional ownership, and insider ownership are positively associated with higher financial performance of companies on the Ghana Stock Exchange. The study concludes that Ghanaian ownership is heavily concentrated and that concentrated structures should be encouraged to improve monitoring and performance.
UnumProvident Corporation reported financial results for the fourth quarter of 2006. Net income was $276.1 million, compared to $137.5 million in the fourth quarter of 2005. Operating trends improved in the Unum US, Unum UK, and Colonial segments. Kevin McCarthy was named president of Unum US and Robert Best was named chief operating officer. The company also announced the pending sale of its GENEX Services subsidiary and reaffirmed 2007 operating earnings per share guidance.
Post privatization Corporate Governance and the challenges of working capital...inventionjournals
The document discusses corporate governance and working capital challenges in Nigeria after privatization. It examines the impact of corporate governance proxies like ownership structure, board characteristics, and privatization on the liquidity ratio of Ashaka Cement Company. Trend analysis found the liquidity ratio was generally higher before privatization but declined significantly at times due to economic issues. Regression analysis suggests some corporate governance factors like minority ownership and privatization had a positive impact on liquidity ratio, while others like non-executive directors and market value had a negative impact. The study concludes corporate governance significantly impacts liquidity ratio but macroeconomic environment also influences company efficiency.
Unum Group reported financial results for the third quarter of 2008. While net income was $108.0 million, this included realized investment losses of $108.9 million. Excluding these losses, after-tax income was $216.9 million. The group disability benefit ratio continued trending downward. Across segments, Unum US saw increases in operating income for disability and voluntary lines, while UK saw a decrease in operating income of 4.9% compared to the prior year. Overall the company demonstrated continued strong performance across core segments and a strong capital position is being maintained despite challenges in the current economic environment.
Dear student, Warm Greetings of the Day!!! We are a qualified team of consultants and writers who provide support and assistance to students with their Assignments, Essays and Dissertation. If you are having difficulties writing your work, finding it stressful in completing your work or have no time to complete your work yourself, then look no further. We have assisted many students with their projects. Our aim is to help and support students when they need it the most. We oversee your work to be completed from start to end. We specialize in a number of subject areas including, Business, Accounting, Economic, Nursing, Health and Social Care, Criminology, Sociology, English, Law, IT, History, Religious Studies, Social Sciences, Biology, Physic, Chemistry, Psychology and many more. Our consultants are highly qualified in providing the highest quality of work to students. Each work will be unique and not copied like others. You can count on us as we are committed to assist you in producing work of the highest quality. Waiting for your quick response and want to start healthy long term relationship with you. Regards http://www.cheapassignmenthelp.com/ http://www.cheapassignmenthelp.co.uk/
Market Orientation, Firms’ Level Characteristics and Environmental Factors: I...IOSR Journals
The study assesses the effect of firms’ level characteristics, market orientation and environmental factors on the influence of e-commerce competence development on organizations’ performance. Data were drawn from 130 managers from a population of 193 managers of all the airline firms in the industry. Partial correlation coefficient was used to test the moderating effect of variables of study. The result shows that firms’ level characteristics and proactive market orientation moderate the influence of e-commerce competence development on organizational performance. Based on these findings, we conclude that certain market culture and firms’ level characteristics affect the influence of e-commerce competence on performance. We therefore recommend that e-commerce firms should anticipate latent needs by offering technological advances that enables them to lead customers to new and better value proposition and satisfaction.
A critical analysis of equity ownership structure on firm’s performanceAlexander Decker
This document summarizes a research study on the relationship between equity ownership structure and firm performance of publicly listed companies in Kenya. It discusses how ownership concentration and identity can influence corporate governance and potentially affect performance. The study is based on agency, stewardship, and stakeholder theories. It reviews literature showing mixed results on the effects of state ownership, institutional ownership, and other ownership types on firm value and performance. The objective is to analyze how controlling shareholder identity influences performance of listed Kenyan companies.
11.mahoney.et al 0104www.iiste.org call for_paper-130Alexander Decker
This study examines the relationship between corporate social performance (CSP) and financial performance (FP) for firms that restate their financial statements compared to firms that do not restate. Using a sample of 44 U.S. firms, the study finds that after a restatement, CSP strengths, weaknesses, and people dimensions increased more for restating firms than non-restating firms. Additionally, the positive relationship between return on assets and CSP strengths was stronger for restating firms. In particular, this relationship was driven by CSP people strengths.
This study examines the relationship between institutional ownership (IO) and corporate social performance (CSP) for Indonesian companies. Prior research on companies in North America and Europe found a positive relationship between IO and CSP, but this relationship has not been investigated for Indonesian companies. The study uses a CSP index developed by Jantzi Research Inc. to measure CSP based on social and environmental disclosures in annual reports. Institutional ownership is measured by the number of institutions owning shares in a company. The results of the analysis of 324 Indonesian companies found no significant relationship between institutional ownership and CSP. This suggests that institutional investors in Indonesia do not include CSP in their investment decisions.
This study examines the relationship between institutional ownership (IO) and corporate social performance (CSP) for Indonesian companies. Prior research on companies in North America and Europe found a positive relationship between IO and CSP, but this relationship has not been investigated for Indonesian companies. The study uses a CSP index developed by Jantzi Research Inc. to measure CSP based on social and environmental disclosures in annual reports. Institutional ownership is measured by the number of institutions owning shares in a company. The study controls for financial performance, firm size, and industry. The results found no significant relationship between institutional ownership and CSP for Indonesian companies, suggesting institutional investors do not consider CSP in their investment decisions for these companies.
The Effect of Capital Structure on Profitability of Energy American Firms:inventionjournals
International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online.
Effect of corporate social responsibility information disclosure on financial...Alexander Decker
This study analyzed the effect of corporate social responsibility (CSR) information disclosure on financial performance and firm value in banking companies listed on the Indonesia Stock Exchange between 2008-2011. The study found that CSR disclosure positively affected three measures of financial performance (return on assets, return on equity, return on sales) and firm value as measured by Tobin's Q. Additionally, return on assets and return on equity positively influenced firm value, but return on sales did not. The study used quantitative methods including descriptive analysis and path analysis to test the relationships between CSR disclosure, financial performance, and firm value.
This document discusses factors that affect firm value for public manufacturing firms in Indonesia, including social responsibility, corporate governance, company size, and profitability. It provides background on the relationship between these factors and firm value based on prior literature. Theoretical frameworks discussed that may explain these relationships include agency theory, stakeholder theory, legitimacy theory, positive accounting theory, and signaling theory. The purpose of the study is to develop a new model of the relationships between these exogenous, intervening, and endogenous variables based on these theories and prior empirical research.
The document analyzes the failure of corporate governance in the telecommunications industry and recent reform efforts. It discusses how a lack of oversight and toxic cultures at companies like WorldCom led to massive accounting scandals and failures. Reform efforts included the Sarbanes-Oxley Act, which aimed to improve internal controls and board oversight. Recent proposals emphasize the board's role in monitoring management, aligning executive pay with long-term performance, and engaging with shareholders. Good corporate governance with transparency, accountability and an emphasis on sustainability is important for companies to avoid failures and crises.
Corporate turn around strategies by financially distressedAlexander Decker
This document summarizes a research study on corporate turnaround strategies used by financially distressed companies listed on the Nairobi Securities Exchange from 2002-2008. The study found that the most common strategy used was employee layoffs (63% of companies), followed by asset restructuring (50% of companies). Debt restructuring and top management changes were the least used strategies. Restructuring strategies were more intensive in the year of distress and less so in subsequent years, presumably to address immediate liquidity issues. The document provides context on definitions of financial distress, factors influencing bankruptcy risk, and previous literature on turnaround strategies.
Corporate turn around strategies by financially distressedAlexander Decker
This document summarizes a research study on corporate turnaround strategies used by financially distressed companies listed on the Nairobi Securities Exchange from 2002-2008. The study found that the most common strategy used was employee layoffs (63% of companies), followed by asset restructuring (50% of companies). Debt restructuring and top management changes were the least used strategies. Restructuring strategies were more intensive in the year of distress and less so in subsequent years, presumably to address immediate liquidity issues. The document provides context on definitions of financial distress, factors influencing bankruptcy risk, and previous literature on turnaround strategies.
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The document discusses corporate turnaround strategies used by financially distressed companies listed on the Nairobi Securities Exchange from 2002-2008. It finds that the most common strategies were employee layoffs (63% of companies) and asset restructuring (50% of companies). Debt restructuring and top management changes were less common strategies. Restructuring efforts were more intensive in the year of distress and less so in subsequent years, presumably to address immediate liquidity issues. The document provides context on factors that can lead to financial distress and discusses various turnaround strategies cited in previous literature such as changing management, debt restructuring, operational restructuring, and asset restructuring.
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3) No correlation for medium service firms.
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11.mahoney.et al 0104www.iiste.org call for_paper-130
1. Issues in Social and Environmental Accounting
Vol. 2, No. 1 June 2008
Pp. 104-130
Corporate Social Performance, Financial
Performance for Firms that Restate
Earnings
Lois Mahoney
College of Business
Eastern Michigan University, USA
William LaGore
College of Business
Eastern Michigan University, USA
Joseph A. Scazzero
College of Business
Eastern Michigan University, USA
Abstract
This study examines corporate social performance (CSP) in firms that restate their financial
statements and, using a match pair design, compares their performance to firms that do not
restate their financial statements. Utilizing a randomized block design (two years prior to the
restatement and two years after the restatement) for a sample of 44 U.S. firms, we found that
CSP Strengths, CSP Weaknesses, CSP People Strengths, and CSP People Weaknesses all in-
creased after restatement though weaknesses increased at a greater rate than strengths. Addi-
tionally, using panel data and a match pair design we found, we found that restating firms had
a greater increase in CSP Strengths, CSP Weaknesses, CSP Product Strengths, CSP People
Strengths and a greater decrease in Total CSP People than non-restating firms after the restate-
ment period. When comparing the relationships between CSP and financial performance (FP),
we found that the positive relationship between ROA and CSP Strengths is greater for restate-
ment firms than non-restating firms. In particular, we find that this positive relationship is a
result of the People dimension of CSP, in particular CSP People Strengths.
Key Words: financial restatements, corporate social performance, financial performance,
Lois Mahoney is Associate Professor of Accounting in the Department of Accounting and Finance College of Busi-
ness Eastern Michigan University, USA, email: lois.mahoney@emich.edu. William LaGore is assistant professor,
accounting and finance in the Department of Accounting and Finance College of Business Eastern Michigan Univer-
sity, USA, email: william.lagore@emich.edu. Joseph A. Scazzeroa Professor of Decision Sciences in the Department
of Accounting and Finance at Eastern Michigan University College of Business, USA, email: jscazzero@emich.edu
2. L. Mahoney, W. LaGore, J. A. Scazzaro / Issues in Social and Environmental Accounting 1 (2008) 104-130 105
CORPORATE SOCIAL PERFORM- of stakeholder confidence in financial
ANCE AND THE ISSUE OF FINAN- markets (Donoher et al., 2007) as well as
CIAL RESTATEMENTS a firm’s corporate social performance
(CSP). According to Carroll (1979),
The quality of financial reporting has CSP considers a variety of factors, in-
come under increased scrutiny in recent cluding discretionary responsibility to
years because of high-profile financial the community, economic responsibility
reporting failures, such as Enron and to investors and consumers, ethical re-
WorldCom, and the significant increase sponsibilities to society and legal re-
in the number of financial restatements. sponsibility to the government or the
An October 2002 General Accounting law. In this turbulent environment, these
Office (GAO) report documents that the firms need to devise strategies that will
number of financial restatements has enable them to survive and prosper in
increased 145 percent from 1997 to 2001 this environment in which stakeholders
and that publicly traded companies lost demand both financial performance (FP)
billions in market capitalization in the and effective stakeholder responsiveness
days and months following a restatement (Johnson and Greening, 1999). These
announcement. The GAO report further firms may need to keep in mind CSP as
concludes that the increase in restate- they pursue superior performance
ments has negatively impacted investor through being responsive to the environ-
confidence. For example, the GAO’s ment, maintaining product quality and
October 4, 2002 letter to Senator Paul being responsive to the communities in
Sarbanes states the following: which it operates and the people it em-
ploys (Turban and Greening, 1997).
“The growing number of restate-
ments and mounting questions Though research concerning the nature
about certain corporate account- of the relationship between CSP and FP
ing practices appear to have continues to be mixed (See Griffin and
shaken investors’ confidence in Mahon, 1997; Roman et al., 1999), a
our financial reporting system... number of findings indicate a positive
empirical research studies and association (Worrell et al., 1991; Preston
academic experts generally sug- and O’Bannon, 1997; Frooman, 1997;
gest accounting issues have nega- Roman et al., 1999; Orlitzky and Benja-
tively affected overall investor min, 2001; Murphy, 2002; Simpson and
confidence and raised questions Kohers, 2002). Furthermore, most of
about the integrity of U.S. mar- these findings are derived from compa-
kets.” nies that are not experiencing financial
reporting failures. The objectives of this
paper are twofold: First, we address the
Lawsuits against firms resulted in nearly
question of whether firms that restate
a 1% loss in market value (Bhagat et al.,
financial statements have different levels
1998), in which an estimated one-third
of CSP than non-restating firms. Sec-
of this loss is attributed to harmed firm
ond, we address the questions on
reputation (Karpoff and Lott, 1993).
whether the relationship between CSP
The problem does not end with the pas-
and FP is different between restating
sage of Sarbanes-Oxley Act (SOX) but
firms and non-restating firms. This re-
its continuation has implication for lack
3. 106 L. Mahoney, W. LaGore, J. A. Scazzaro / Issues in Social and Environmental Accounting 1 (2008) 104-130
search study will contribute to the ac- to financial reporting failures. Palmrose
counting research stream investigating et al. (2004) find a mean abnormal re-
financial restatements, as well as the turn of -9.2% in the two-day window
ethics research of CSP, and extends the (day 0, 1) around a restatement an-
debate on the link between CSP and FP. nouncement, with more negative returns
The remainder of the paper is organized for restatements involving fraud (-20%).
as follows. First, we examine the back- Palmrose and Scholz (2004) find the
ground, theory and hypotheses. Second, negative market reaction is greater for
we explain our research methods and restatements of core earnings (i.e. pre-
third, we present the results. The final tax earnings from primary operations)
section includes our summary, discus- than for non-core earnings (i.e. all other
sion and conclusions. earnings). Anderson and Yohn (2002)
document the long-term economic con-
sequences of restatements by finding
BACKGROUND, THEORY AND average cumulative abnormal returns of
HYPOTHESES -7.97% for the period from three days
before the restatement announcement
Financial Reporting Failures through three days after the restatement
filing with the SEC.
Financial reporting failures include both
frauds and restatements. During the pe- There are also legal consequences to a
riod of 1987-1996, the SEC found that a financial reporting failure. In the Palm-
majority of frauds involved financial rose and Scholz (2004) study, 38 percent
statement fraud (Beasley et al., 1999). of the companies in their restatement
These frauds included sham sales, re- sample subsequently faced civil litiga-
cording conditional sales as finalized tion. They found that companies with
and recording revenues early. Thus, for restatements of core earnings (primarily
the purpose of this study, we examine revenue restatements) and pervasive re-
only accounting restatements. Restate- statements (i.e. more than one account-
ments are an admission that previously ing item restated) are more likely to be
issued financial statements were not in subject to litigation.
accordance with GAAP (Palmrose and
Scholz, 2004). Early research focused A financial reporting failure also dam-
on characteristics of restating firms. For ages the reputation of the firm, auditors,
example, Kinney and McDaniel (1989) management, and the board of directors.
find restatement firms are smaller, less For example, Srinivasan (2005) found
profitable, have higher debt, and are that outside board members experience
slower growing. DeFond and Jiambalvo significant reputational costs following
(1991) find earnings overstatements are accounting restatements. Srinivasan
more likely for firms with diffuse own- finds significant turnover of board mem-
ership and lower growth in earnings, and bers in the three years following the re-
less likely for firms with audit commit- statement, including director turnover
tees. for 48 percent of firms that restate earn-
ings downward. The likelihood of direc-
Recent studies document significant tor turnover increases if the board mem-
negative economic consequences related ber is also on the audit committee. The
4. L. Mahoney, W. LaGore, J. A. Scazzaro / Issues in Social and Environmental Accounting 1 (2008) 104-130 107
study also finds outside directors lose reliable accounting numbers following a
positions on other boards following a financial reporting failure.
restatement. As for debt contracts, Sengupta (1998)
suggests that quality of financial report-
Another study, Desai et al. (2006), ex- ing is likely used by lenders in calculat-
amined the reputational penalties to ing default risk. Sengupta (1998) found
managers of restating firms and found that firms with high disclosure quality
that 60% of restating firms experience ratings from financial analysts are
management turnover in the two years charged a lower cost of debt, and the
following a restatement as compared importance of disclosure is greater when
with 35 percent for a control sample. there is greater market uncertainty as
An audit firm’s reputation can be dam- measured by the variance of stock re-
aged by a financial reporting failure, as turns. Thus, lenders likely demand a
evidenced by the demise of Arthur An- higher risk premium following a report-
dersen. Barton (2005) examines the de- ing failure in part due to the perceived
mand for auditor reputation by examin- decrease in quality of the accounting
ing the client defections from Arthur reports.
Andersen. Barton (2005) finds firms
that are more visible in the capital mar- The risk premium demanded by share-
kets switched sooner to another Big 5 holders and debt holders also increases
auditor, as they were concerned about following a reporting failure because of
their auditor’s reputation and the credi- the increased uncertainty about the fu-
bility of their financial reporting. ture profitability and economic prospects
of restatement firms. Palmrose et al.
Accounting numbers used in contracts (2004) found a significant downward
(e.g. compensation and debt contracts) revision in earnings forecasts following
must be verifiable for the contract to be restatements and a significant increase in
enforceable in court (Watts, 2003). analyst forecast dispersion (a proxy for
Based on prior literature, it is reasonable uncertainty). Hribar and Jenkins (2004)
to assume that a financial reporting fail- found accounting restatements lead to
ure leads to greater uncertainty about the decreases in expected future earnings.
reliability and verifiability of the ac-
counting numbers used in contracts. As In summary, restatements can have nu-
a restatement casts doubt on the quality merous negative effects. These include
of the financial reports and increases the economic losses to investors; damage to
risk to the contracting parties, sharehold- the reputations of the firm, auditors,
ers and lenders will demand an increased management, and the board of directors;
risk premium following a reporting fail- an increase in the cost of capital; and a
ure. For example, empirical studies find negative impact on future earnings
that frauds and accounting restatements power.
lead to an increased cost of capital (e.g.,
Dechow et al., 1996; Hribar and Jenkins, CSP and FP
2004). Investors demand a higher rate
of return to compensate for the per- Research on the relationship between
ceived riskiness of the firm due to less CSP and FP has resulted in positive
(Wokutch and Spencer, 1987; McGuire
5. 108 L. Mahoney, W. LaGore, J. A. Scazzaro / Issues in Social and Environmental Accounting 1 (2008) 104-130
et al., 1988, 1990; Waddock and Graves, employee relations, environment, human
1997; Simpson and Kohers, 2002; Or- rights, and product. The KLD index
litzky and Benjamin, 2001; Mahoney ratings are based upon data gathered
and Roberts, 2007; Hill et al., 2007), from a broad range of sources; both in-
negative (Waddock and Graves, 1997, ternal and external to the firm (see Wad-
Preston and O’Bannon, 1997; Patten, dock and Graves, 1995 for further de-
2002) and neutral results (Alexander and tails). Subsequently, this multidimen-
Buchholz, 1978; Aupperle et al., 1985; sional index has been regarded as one of
Ullman, 1985; Cochran and Wood, the best information sources available to
1984; Shane and Spicer, 1983; Fauzi, researchers studying CSP (Hillman and
forthcoming; Moore, 2001; Fauzi et al., Keim, 2001) and has been used in many
2007). The negative view on the rela- subsequent studies (McGuire et al.,
tionship between CSP and FP argues 2003; Hillman and Keim, 2001; Albin-
that firms incur costs to improve social ger and Freeman, 2000, Greening and
performance and by doing so, they re- Turban, 2000; Mahoney and Roberts,
duce profits and shareholder wealth. 2007; Mahoney et al., 2008; Johnson
The positive view argues that better CSP and Greening, 1999).
is viewed as positive by various stake-
holders, leading to improved FP (Jones, Research Questions
1995; Jones and Wicks, 1999). Those
who support the neutral relationship ar- CSP: As discussed previously, there are
gue that the direct relationship between significant negative economic, legal,
CSP and FP does not exists due to the reputational, and contractual conse-
complexity of the environment in which quences to a financial reporting failure.
firms and society operate in (Mahoney A financial reporting failure is evidence
and Roberts, 2007) that previously issued accounting reports
were incorrect, thus creating uncertainty
The problem of measuring CSP is ar- about the credibility and verifiability of
gued by Waddock and Graves (1997) as financial reports after the reporting fail-
the primary reason for the conflicting ure. In response to financial reporting
results found regarding the relationship failures, studies find firms take steps to
between CSP and FP. Waddock and improve corporate governance mecha-
Graves (1997) found a positive relation- nisms following a fraud or restatement
ship between CSP and FP when using an in order to restore credibility and trans-
improved measurement of CSP, the parency in their financial reporting. For
KLD index. The KLD index provides example, Farber (2005) finds fraud firms
access to a wide range of independent, increase the number of audit committee
consistently applied ratings of U.S. firms meetings and the number and percentage
across a number of important social per- of outside board members in the three-
formance attributes that were determined year period following the fraud. LaGore
by a knowledgeable group of individuals (2008) finds restating firms significantly
not connected with the firms (Waddock increase the number of outside directors
and Graves, 1997). KLD evaluates each on the board, the number of audit com-
company traded on the U. S. stock ex- mittee meetings, and the number of out-
change over the dimensions of commu- side directors and financial experts on
nity, corporate governance, diversity, the audit committee in the three-year
6. L. Mahoney, W. LaGore, J. A. Scazzaro / Issues in Social and Environmental Accounting 1 (2008) 104-130 109
period following a restatement an- H1: CSP (Total, Product and People)
nouncement. These changes in corpo- before restatement is different than CSP
rate governance may be mechanisms after restatement.
that constrain management’s opportunis-
tic behavior and lead to more transparent CSP and FP: As discussed before, em-
reporting. However, it is unclear how pirical results concerning the nature of
this improvement in corporate govern- the relationship, if any, between CSP
ance following a fraud or restatement and FP, continues to be mixed (See Grif-
affects a firm’s CSP. fin and Mahon, 1997; Roman et al.,
1999). Researchers have hypothesized
Prior research finds a positive relation- and have given rational theoretical justi-
ship between disclosure level and CSP fication for negative, positive, and neu-
(Gelb and Strawser, 2001). Mahoney et tral links between CSP and FP. Wad-
al. (2008) examine CSP and executive dock and Graves (1997) argue that the
compensation before and after the Sar- fundamental reason for the uncertainty
banes-Oxley Act (SOX) and find that the between the CSP and FP relationship is
improvements in corporate governance the problem of measuring CSP. Hence,
required by SOX may be resulting in Waddock and Graves (1997) used the
increased transparency regarding the KLD database as an improved measure
measurement of CSP and an increase in of CSP and found a significant relation-
accountability, as firms appear to be ship. Orlitzky (2008) found that there is
structuring compensation to promote an overall positive, but highly variable
CSP. Gelb and Strawser (2001) also relationship between CSP and FP and
find that more extensive disclosures are noted that the large variability of find-
provided by firms with higher CSP rat- ings in previous research is party due to
ings. Given that measures of CSP tend primary study artifacts. As studies find
to rely on publicly available information, financial restatements negatively affect
it may be that firms before the restate- firm performance and lead to increased
ment would have been reluctant to make uncertainty about the future profitability
factors that are encapsulated in CSP and economic prospects of restatement
weaknesses (bad news) available to the firms, it would be interesting to compare
public. It follows that if improvements the association between CSP and FP
in corporate governance following a re- between restating firms and non-
statement encourage revelation and restating firms. Based upon these incon-
transparency, the resulting increase in sistencies in prior research, it is unclear
information available may influence how the negative effects of restatements
CSP in a negative direction. Further- on firm performance will impact CSP.
more, following the restatement period, Thus, since we are unable to predict a
firms may feel need to be more account- directional effect, the second research
able, thus influencing CSP in a positive question tested is as follows:
direction. However, it would be difficult
to theoretically determine the net direc- H2: The relationship between CSP and
tional change in CSP as a result of re- FP is different for restating firms than
statement. Therefore, the first research non-restating firms.
question tested is:
7. 110 L. Mahoney, W. LaGore, J. A. Scazzaro / Issues in Social and Environmental Accounting 1 (2008) 104-130
METHODS earnings data are considered outliers
with studentized residuals greater than
Sample Selections the absolute value of three. Outliers are
observations that are extreme or appear
Data on restating firms was obtained inconsistent with the remaining data.
from the GAO-03-395R Financial State- This resulted in a final sample of 196
ment Restatement Database for the pe- firms that had restated their financial
riod of January 1, 1996 to June 30, 2002. statements. Missing CSP data for two
Of the initial sample of 919 restating years prior and two years after the re-
firms, 40 firms were eliminated because statements reduced the final sample size
no ticker symbol or CNUM could be to 44 firms. These 44 firms were
found. Ninety-three firms were deleted matched based upon SIC code to firms
because of multiple restatements. The that had not restated their financial state-
initial collection of financial data found ments. Thirty-one companies were
that 153 firms were missing the required matched based upon the four-digit SIC
financial data. Furthermore, 174 firms code, five companies were matched
were missing financial data in the post- based upon the last 3 digits of the SIC
restatement period only, 200 firms were code and eight companies were matched
missing financial data in the pre- based upon the last two digits of the SIC
restatement period only, and 48 firms code. The final sample consisted four
were missing financial data in both the years of data for 44 restating firms and
pre- and post-restatement periods. The 44 non-restating firms, for a total num-
missing data does not appear to be clus- ber of 88 firms with 352 observations.
tered in either the pre- or post-
restatement period. The number of The Model
firms with missing Compustat data in
the pre-restatement period is comparable To test hypotheses 1, a randomized
to the post-restatement period, with 200 block design was used to determine the
and 174 firms, respectively. Therefore, effect, if any, of restatement on the CSP.
approximately 63 percent (575 firms) of To test hypotheses 2, panel data analysis
the initial restatement sample of 919 was used to examine the impact of re-
firms did not have sufficient financial statement firms on the association be-
data from Compustat to be included in tween the dependent variable CSP and
the final sample. This study requires the independent variable FP (ROA) with
financial data for the two years prior to firm size, firm leverage and firm indus-
and the two years following the restate- try as control variables. In order to cap-
ment announcement year. A likely ex- ture omitted factors that may lead to a
planation for the loss of these firms is difference in CSP levels between the
due to the fact that many restating firms prestatement years and the postatement
declare bankruptcy or are delisted fol- years, the indicator variable (as denoted
lowing the restatements. This could po- by Post) is included as a separate inde-
tentially lead to a survivorship bias, pendent control. Additionally, in order
which may prevent the results from gen- to capture the difference between restat-
eralizing to the overall set of publicly ing firms and non-restating firms, the
traded firms. Finally, 15 firms were indicator variable (as denoted by Match)
eliminated because their returns and is also included as a separate independ-
8. L. Mahoney, W. LaGore, J. A. Scazzaro / Issues in Social and Environmental Accounting 1 (2008) 104-130 111
ent variable. Two-factor interaction the prestatement years and the postate-
terms are added to the model to allow ment years. The three-factor interaction
the effect of an independent variable on term ROA*Post*Match is added to the
the dependent variable to vary by the model to allow the ROA*Post interac-
level of another independent variable. tion to differ between restating and non-
For example, the interaction term restating firms. Hypotheses two is tested
ROA*Post allows the effect of ROA on through the following regression equa-
the dependent variable CSP to differ for tion:
CSPi,t+1 = b0 +b1ROAit + b2Matchit + b3Postit + b4ROA*Matchit +
b5ROA*Postit + b6Match*Postsit + b7ROA*Post*Matchit (1)
+ b8Debt-to-Equityit + b9Assetsit + b10Industrykit
results found regarding the characteris-
i: firm tics of reporting firms, the quality of
t: year their reporting, and the relationship be-
k: 1-7 (number of SIC codes minus tween social performance and economic
one) performance (Roberts, 1992; Gray et al.,
CSP = Corporate Social Perform- 1995).
ance Score Value for Total,
People, Product, Strengths and Shane and Spicer (1983) was one of the
Weaknesses first published empirical studies to rely
Post = 1 if one or two years after on externally produced ratings of CSP,
restatement, 0 if otherwise using data developed by the U.S. Coun-
Match = 0 if restatement firm, 1 oth- cil on Economic Priorities (CEP). They
erwise argued that externally produced data was
ROA =Return on Assets superior to voluntary disclosure when
Debt-to-Equity = Total Debt/Total Eq- performing cross-sectional studies, stat-
uity ing:
Industryk = 1 if industry k, 0 otherwise In the absence of mandated dis-
closure and reporting standards,
voluntary disclosures tend to be
Measures inconsistent and non-comparable
Dependent Variables from firm to firm, even in the
Measurement of CSP same industry. On the other hand,
externally produced data (at least
As prior research points out, there is no as produced by the CEP) was
history of systematic social reporting gathered using consistent proce-
(Gray et al., 1995) and there are no gen- dures for collection and reporting
erally accepted social reporting stan- across firms. Comparisons across
dards (Wallage, 2000). Because of this, firms are thereby possible and
data for empirical research on CSP origi- potentially meaningful (p. 523).
nates from voluntary disclosures by
firms or from external monitors. The
Subsequent accounting studies also
absence of standardized reporting is at
made use of CEP ratings (e.g., Cowen et
least partially responsible for the mixed
al., 1987; Roberts, 1992).
9. 112 L. Mahoney, W. LaGore, J. A. Scazzaro / Issues in Social and Environmental Accounting 1 (2008) 104-130
In 1994, several U.S. researchers began et al., 2001). The KLD database has
to address the major problems in CSP been recognized as the best information
measurement by using the Kinder, available for researchers studying CSP
Lydenberg, Domini (KLD) database as a in the U.S. (Hillman and Keim, 2001).
measurement of CSP. KLD rates over Therefore, we use KLD’s ratings of so-
650 corporations traded on the U.S. cial performance to measure CSP.
stock exchanges on various dimensions
considered important to social perform- Following previous research (Johnson
ance. Because the KLD database was and Greening, 1999; Mahoney and
developed and maintained by an inde- Thorne, 2005), we use several different
pendent rating service that assessed CSP measurements of CSP that consider To-
across a range of dimensions related to tal CSP, Total CSP Product, and Total
stakeholder concerns, researchers argued CSP People across the dimensions of
that the KLD database brought a new strengths and weakness. CSP Strengths
and improved consistent measurement of are positive aspects of CSP; examples
CSP for United States companies include positive union relations, strong
(Waddock and Graves, 1997). U.S. re- community giving, and environmental
search flourished with this new measure- planning. CSP Weaknesses are negative
ment assessment (Graves and Waddock, aspects of CSP; examples include safety
1994; Waddock and Graves, 1997; Grif- problems, human rights violations, and
fin and Mahon, 1997; Bendheim et al., environment fines. Figure 1 summarizes
1998; Berman et al., 1999; Johnson and the different measures of CSP employed
Greening, 1999; Greening and Turban, in this study.
2000; Albinger and Freeman, 2000; Ruf
Figure 1
Summary of CSP Measures
Total CSP Variable CSP Strengths CSP Weaknesses
Variable Variable
Total CSP Total CSP Total CSP Product Total CSP People
(Community, Diversity, Em-
ployee Relations, Environ-
ment, International, Product
and Business Practices and
Other)
Product Dimension (Product Total CSP Product CSP Product CSP Product
and Business Practices and Strengths Weaknesses
Environment)
People Dimension Total CSP People CSP People CSP People
(Community, Diversity and Strengths Weaknesses
Employee Relations
*Per Mahoney and Thorne (2005)
10. L. Mahoney, W. LaGore, J. A. Scazzaro / Issues in Social and Environmental Accounting 1 (2008) 104-130 113
Each company is given a Total CSP rat- ple. Total CSP People captures the con-
ing by KLD along seven dimensions: tributions firms make to communities
community, diversity, employee rela- through their hiring of women and mi-
tions, environment, `international, prod- norities and their treatment of employ-
uct and business practices, and other []. ees. Executives may interpret the costs
Each of these dimensions is given a of hiring minorities as unnecessary
strength rating and a weakness rating on short-term expenses; however, they may
a scale of zero to two. A rating of 0 indi- recognize the long-term benefits of pro-
cates no strengths or no weaknesses active employment policies when con-
while a rating of 2 represents a major sidering the long-term avoidance of
strength or a major weakness. CSP costly fines (Mahapatra, 1984). Further-
Strengths are calculated by summing the more, signaling theory suggests that hir-
strength ratings across all seven dimen- ing underrepresented groups sends a
sions for each company while CSP positive signal regarding a firm’s reputa-
Weaknesses are calculated by summing tion and legitimacy (Turban and Green-
the weakness ratings across all seven ing, 1997). Total CSP People is com-
dimensions. Finally, Total CSP is calcu- posed of KLD’s dimensions of commu-
lated by taking CSP Strengths and sub- nity, employee relations, and diversity.
tracting CSP Weaknesses.
Corporate governance would be ex-
Our second measure of CSP is a sub- pected to have bearing and an associa-
dimension of Total CSP: Total CSP tion on aspects or sub-dimensions of
Product. Total CSP Product attempts to CSP that could be directly impacted by
capture the extent to which a firm is executives’ decisions while other sub-
committed to quality products and prac- dimensions may be more impacted by
tices sound environmental policies. For the general business or cultural context
example, executives concerned with in which a firm operates. For example, a
consistent returns over time may likely firm’s diversity may be primarily im-
avoid the imposition of costly environ- pacted by the labor pool that is available,
mental fines (Johnson and Greening, while its product dimensions may be
1999; Silverstein, 1994). Total CSP more easily impacted by executive’s
Product is comprised of KLD’s product attention to control and safety aspects in
and business practices and environment product development. In fact, previous
dimensions that relate to product and research has found differential associa-
service quality and to the firm’s stance tions between some aspects of corporate
toward the natural environment. This governance and the people/product as-
classification is consistent with ISO pects of CSP. For example, a positive
standards that require firms to establish a relationship for U.S. firms between top
series of management subsystems, stan- executive equity and the total product
dards, and guidelines to ensure product dimension of CSP has been found
quality as well as safe and environmen- (Johnson and Greening, 1999), without
tally responsible practices (Uzumeri, comparable associations on the people
1997). aspect of CSP.
Our third measure of CSP is a sub- As discussed before, firms take steps to
dimension of Total CSP: Total CSP Peo- improve corporate governance mecha-
11. 114 L. Mahoney, W. LaGore, J. A. Scazzaro / Issues in Social and Environmental Accounting 1 (2008) 104-130
nisms following a fraud or restatement base. Industries are represented by
in order to restore the credibility of their dummy variables and were broken down
financial reports. In addition, it is ex- by four-digit Standard Industrial Classi-
pected that corporate governance would fication (SIC) code per Graves and Wad-
have bearing and an association on as- dock (1994).
pects or sub-dimensions of CSP that
could be directly impacted by execu- Panel Data Models
tives’ decisions. Thus it follows that
improvements in corporate governance In summary, we investigate the behavior
following a financial restatement may of CSP and its relation to FP by running
affect certain aspects or sub-dimensions nine separate regressions using panel
of CSP, particularly those that could be data—three regressions using CSP as
directly affected by executive decisions. our dependent variable measure for To-
tal CSP, Total CSP Product, and Total
Independent Variables for Panel Data CSP People; three regressions using
Analysis CSP Strengths for Total CSP Strengths,
CSP Product Strengths, and CSP People
Following previous research, return on Strengths and three regressions using
assets (ROA) was used to measure a CSP Weaknesses for Total CSP Weak-
firm’s FP (Waddock and Graves, 1997, nesses, CSP Product Weaknesses, and
Roman et al., 1999, Mahoney and Rob- CSP Weaknesses, all with ROA as the
erts, 2007; Fauzi, et al., 2007). Follow- independent variable.
ing the works of prior research
(Waddock and Graves, 1997; Mahoney
and Roberts, 2007), data on CSP was RESULTS
collected for the year following the year
ROA was reported to provide an oppor- Descriptive Statistics and Correlation
tunity for capturing a lag between CSP Analysis
and FP. Information on ROA was ob-
tained from the Compustat database. Table 1 shows the means, standard de-
viations, and correlations for our inde-
Control Variables. Consistent with prior pendent, dependent, and control vari-
research, we control for firm size, debt ables for the entire sample consisting of
level and industry as previous research non-restating and restatement firms.
noted that they may cause differences in The means for Total CSP, CSP
FP (Waddock and Graves, 1997; Graves Strengths, and CSP Weaknesses are .15,
and Waddock, 1994; Mahoney and Rob- 2.99, and 2.84 respectively. The means
erts, 2007). Consistent with prior re- for Total CSP Product, CSP Product
search, total assets is used as a proxy for Strengths, and CSP Product Weaknesses
size of the firm (Mahoney and Roberts, are -.61, .50, and 1.11 respectively. The
2007; Graves and Waddock, 1994; Wad- means for Total CSP People, CSP Peo-
dock and Graves, 1997) and debt-to- ple Strengths, and CSP People Weak-
equity (Mahoney and Thorne, 2006) is nesses are 1.53, 2.39, and .86 respec-
used to represent debt level. Informa- tively. The mean ROA is 6.07% and is
tion on total assets and debt-to-equity significantly positively correlated with
are obtained from the Compustat data- Total CSP, Total CSP Product, and Total
12. L. Mahoney, W. LaGore, J. A. Scazzaro / Issues in Social and Environmental Accounting 1 (2008) 104-130 115
Table 1
All Firms Pearson Correlation Matrix: Correlations with ROA, Control Financial Variables and Lagged CSP
Variable Mean SD 1 2 3 4 5 6 7 8 9 10 11
1. Total CSP .15 3.132
2. CSP Strengths 2.99 2.537 .622**
3. CSP Weaknesses 2.84 2.523 -.616** .234**
4. Total CSP Product -.61 1.686 .707** .095 -.782**
5. CSP Product Strengths .50 .724 .378** .665** .200** .203**
6. CSP Product Weaknesses 1.11 1.694 -.542** .190** .863** -.908** .225**
7. Total CSP People 1.53 2.121 .762** .844** -.097 .155** .358** -.001
8. CSP People Strengths 2.39 2.010 .609** .952** .201** .050 .429** .134* .897**
9. CSP People Weaknesses .86 .944 -.415** .130* .646** -.241** .108* .286** -.338** .113**
10. ROA 6.07% 6.78% .199** .074 -.173** .183** -.012 -.187** .189** .099 -.212**
11. Debt-to-Equity 58.05% 18.86% -.148** .152** .336** -.361** .010 .363** .097 .193** .193** -.323**
12. Assets $12,357 $16,104 -.120* .445** .596** -.410** .243** .512** .253** .441** .372** -.077 .241**
14. L. Mahoney, W. LaGore, J. A. Scazzaro / Issues in Social and Environmental Accounting 1 (2008) 104-130 117
CSP People and significantly negatively Weaknesses. Unlike non-restating
correlated with CSP Weaknesses, CSP firms, ROA for restatement firms is also
Product Weaknesses, and CSP People significantly positively related to Total
Weaknesses. The means for debt-to- CSP People and CSP People Strengths
equity is 58.05% and for assets are along with being significantly negatively
$12,357 million. related to CSP Weaknesses and CSP
People Weaknesses. Additionally, the
Table 2 shows the means, standard de- mean debt-to-equity is 56.4 % and the
viations, and correlations for our inde- mean assets are $13,713 million for non-
pendent, dependent, and control vari- restating firms. Overall, restatement
ables for restatement firms only. The firms tend to have a higher level of Total
means for Total CSP, CSP Strengths, CSP, CSP Strengths, and CSP People
and CSP Weaknesses are .27, 3.11, and Strengths and CSP Weaknesses while
2.84 respectively. The means for Total non-restatement firms have a higher
CSP Product, CSP Product Strengths, level of CSP People Strengths and CSP
and CSP Product Weaknesses are -.68, Product Weaknesses.
.49, and 1.18 respectively. The means
for Total CSP People, CSP People Hypothesis 1
Strengths, and CSP People Weaknesses
are 1.69, 2.49, and .80 respectively. The To test hypothesis 1 a randomized block
mean ROA is 5.48% and is significantly design, equivalent to a paired t-test, was
positively correlated with Total CSP and used to determine the effect, if any, of a
Total CSP Product and significantly restatement on Total CSP, CSP
negatively correlated with CSP Product Strengths, and CSP Weaknesses; Total
Weaknesses. The mean debt-to-equity is CSP Product, CSP Product Strengths,
59.7% and the mean assets are $11,000 and CSP Product Weaknesses; and Total
million. CSP People, CSP People Strengths, and
CSP People Weaknesses. The depend-
Table 3 shows the means, standard de- ent variable consisted of CSP scores
viations, and correlations for our inde- which were compared at different time
pendent, dependent, and control vari- periods, i.e., one year before and after
ables for non-restating firms only. The restatement and two years before and
means for Total CSP, CSP Strengths, after restatement. Table 4 summarizes
and CSP Weaknesses are .03, 2.87, and the average Total, Strengths, and Weak-
2.84 respectively. The means for Total nesses CSP scores for these time periods
CSP Product, CSP Product Strengths, and indicates which differences are sta-
and CSP Product Weaknesses are -.55, tistically significant. Note that the aver-
.51, and 1.05 respectively. The means age total for a score is equal to the dif-
for Total CSP People, CSP People ference between the corresponding aver-
Strengths, and CSP People Weaknesses age strength and average weakness.
are 1.37, 2.28, and .91 respectively. The
mean ROA is 6.64%. Similar to non- Most of the significant differences are
restating firms, ROA is significantly found by looking at two years before
positively correlated with Total CSP and and two years after restatement. CSP
Total CSP Product and significantly Strengths and CSP Weaknesses signifi-
negatively correlated with CSP Product cantly increased at p<.01 in the period
16. L. Mahoney, W. LaGore, J. A. Scazzaro / Issues in Social and Environmental Accounting 1 (2008) 104-130 119
Table 4
Restating Firms Average CSP, Product, and People Scores for One
and Two Year Time Periods
Dependent One Year Two Years
Variable Before After Difference Before After Difference
Total CSP 0.523 -0.136 0.659** 0.545 0.136 0.409
CSP Strengths 3.068 3.114 -0.045 2.773 3.477 -0.705**
CSP Weaknesses 2.545 3.250 -0.705** 2.227 3.341 -1.114**
Total CSP Product -0.614 -0.841 0.227* -0.591 -0.682 0.091
CSP Product 0.500 0.477 0.023 0.477 0.523 -0.046
Strengths
CSP Product Weak- 1.114 1.318 -0.205 1.068 1.205 -0.136
nesses
Total CSP People 1.773 1.636 0.136 1.705 1.636 0.068
CSP People Strengths 2.455 2.523 -0.068 2.205 2.773 -0.568**
CSP People Weak- 0.682 0.886 -0.205 0.500 1.136 -0.636**
nesses
*p<.05
**p<.01
following restatement though CSP change in CSP and test hypothesis two.
Weaknesses increased by a greater In all equations, size, debt-to-equity ra-
amount than CSP Strengths. This sig- tio, and industry were included as con-
nificance appears to be driven by the trol variables. Consistent with prior lit-
People dimensions of CSP as both CSP erature, a one-year lag between the FP
People Strengths and CSP People Weak- variable and the dependent and control
nesses significantly increased at p<.01. variables was used.
Also, CSP People Weaknesses increased
by a greater amount than CSP People Table 5 presents the results of our three
Strengths. When looking at one year panel data regressions that include Total
before and one year after restatement, CSP, CSP Strengths, and CSP Weakness
we do find that Total CSP significantly as our dependent variable and ROA as
decreased and CSP Weaknesses signifi- our independent variable. For Total
cantly increased at p<.01. Additionally, CSP, similar to the results found in the
Total CSP Product significantly de- randomized block design, the Post vari-
creased at p<.05. able was significantly negatively related
at p<.05, indicating that CSP signifi-
Hypothesis 2 cantly declined for all firms in the two
years following the restatement period.
Because we have cross-sectional and For the regression with CSP Strengths as
time series data, we used panel data the independent variable, we found that
analyses to further investigate the the Post variable was significantly posi-
17. 120 L. Mahoney, W. LaGore, J. A. Scazzaro / Issues in Social and Environmental Accounting 1 (2008) 104-130
tively related at p<.05 indicating that p<.01 indicating that the effect of ROA
CSP Strengths are higher after the re- on CSP Strengths also varies in the peri-
statement period for all firms, which is ods prior and after restatement. For the
consistent with our results found in the regression using CSP Weaknesses as the
randomized block design. Additionally, dependent variable, we found the Post
we found the interaction term of variable was significantly positively re-
Match*Post was significantly negatively lated at p<.01, indicating that for all
at p< .01. As shown in Figure 2, though firms the average CSP Weakness in-
CSP Strengths increased for all firms creased in the period following the re-
after the restatement period the increase statement. These results are also consis-
was higher for restatement firms than tent with our findings in the randomized
non-restatement firms, suggesting that block design. Also the interaction term
restatement firms may be more account- of Match*Post was significantly nega-
able after the period of restatement by tively related at p<.05. As shown in Fig-
managing their CSP Strengths. The in- ure 3, restatement firms had a greater
teraction term of ROA*Match is signifi- increase in CSP Weaknesses than non-
cantly negatively related at p<.01 indi- restatement firms. This is consistent
cating that the effect of ROA on CSP with increased transparency following
Strengths is greater for restatement firms the restatement period as more negative
than non-restating firms, supporting hy- information concerning the firm is made
pothesis 2. The interaction term of available.
ROA*Post*Match was significantly
positively related to CSP Strengths at Table 6 presents the results of our three
Table 5
Coefficient (Standard Error) of Panel Data Analysis for CSP Using a One Year
Lag between the Dependent Variable and Independent Variables
Dependent Total CSP CSP Strengths CSP Weakness
Independent
ROA -.015 .025 .009 .016 .025 .018
Match .293 .669 .483 .498 .184 .431
Post -.653 .272* .396 .180* 1.053 .195**
ROA*Match -.074 .039 -.084 .026** -.009 .028
ROA*Post .024 .034 -.012 .023 -.038 .025
Match*Post -.426 .400 -1.124 .266** -.732 .286*
ROA*Post*Match .073 .046 .103 .031** .032 .033
Control
Debt-to-Equity -.184 1.169 .609 .804 1.009 .802
Assets -.001 .000 .001 .000** .001 .000**
R2 .151 .284 .464
Wald chi-square 40.3** 66.8** 133.46**
Panel data model type
Number of Firms 88 88 88
Number of Observations 352 352 352
*p<.05
**p<.01
18. L. Mahoney, W. LaGore, J. A. Scazzaro / Issues in Social and Environmental Accounting 1 (2008) 104-130 121
Figure 2
CSP Strengths
3.4
3.3
Restatement
CSP Strengths
3.2
3.1 Firms
3.0
2.9 Non-
2.8 Restatement
2.7
Firms
2.6
2.5
Prior to After
Restatement Restatement
Time Period
Figure 3
CSP Weaknesses
3.4
C S P W eakn esses
3.2
3.0 Restatement Firms
2.8
2.6 Non-Restatement
2.4 Firms
2.2
2.0
Prior to After Restatement
Restatement
Time Period
19. 122 L. Mahoney, W. LaGore, J. A. Scazzaro / Issues in Social and Environmental Accounting 1 (2008) 104-130
panel data regressions that include Total Product Strengths as the dependent vari-
CSP Product, CSP Product Strengths, able, we found that the interaction term
and CSP Product Weakness as our de- of Match*Post was significantly nega-
pendent variable and ROA as our inde- tively related at p<.05. As shown in Fig-
pendent variable. For Total CSP Prod- ure 4, restatement firms showed a slight
uct, we found no significant relation- increase in CSP Product Strengths in the
ships. For the regression with CSP period following restatement while non-
Table 6
Coefficient (Standard Error) of Panel Data Analysis for CSP Using a One Year
Lag between the Dependent Variable and Independent Variables
Dependent Total CSP Product CSP Product CSP Product Weak-
Strengths ness
Independent
ROA -.009 .011 -.004 .005 .005 .009
Match .219 .319 .066 .152 -.155 .297
Post -.181 .118 .026 .057 .206 .104*
ROA*Match -.003 .017 -.000 .008 .004 .015
ROA*Post .010 .015 -.005 .007 -.015 .013
Match*Post .057 .174 -.168 .083* -.218 .153
ROA*Post*Match -.004 .020 .009 .010 .013 .018
Control
Debt-to-Equity -.306 .522 -.132 .250 .124 .467
Assets -.001 .000** .001 .000 .001 .000**
R2 .3363 .177 .407
Wald chi-square 62.72** 26.26** 74.52**
Panel data model type
Number of Firms 88 88 88
Number of Observations 352 352 352
*p<.05
**p<.01
restatement firms showed a decrease. CSP People, CSP People Strengths, and
Again, suggesting that restatement firms CSP People Weakness as our dependent
may be more accountable after the pe- variable and ROA as our independent
riod of restatement and managing their variable. For our regression with Total
CSP Product Strengths. For the regres- CSP People, the interaction term of
sion using CSP Product Weaknesses as ROA*Match is significantly negatively
the dependent variable, only the Post related at p<.01 indicating that the effect
term was significantly positively related of ROA on Total CSP People is greater
at p<.05 indicating that CSP Product for restatement firms than non-restating
Weaknesses increased for all firms in the firms, supporting hypothesis 2. The in-
period following the restatement. teraction term of ROA*Post*Match is
also significantly positively related to
Table 7 presents the results of our three Total CSP People at p<.01 indicating
panel data regressions that include Total that the effect of ROA on CSP Strengths
20. L. Mahoney, W. LaGore, J. A. Scazzaro / Issues in Social and Environmental Accounting 1 (2008) 104-130 123
Figure 4
CSP Product Strengths
C SP P ro d u c t Stre n g th s
0.60
0.55
0.50 Restatement Firms
0.45
Non-Restatement
0.40
Firms
0.35
0.30
Prior to After Restatement
Restatement
Time Period
also varies in the periods prior and after Strengths also varies in the periods prior
restatement. The interaction term of and after restatement. The interaction
Match*Post is significantly negatively term of Match*Post is significantly
related at p<.05. Per figure 5, restate- negatively related at p<.05. Per figure 6,
ment firms had a bigger decrease in To- restatement firms had a bigger increase
tal CSP People after restatement than in CSP People Strengths after restate-
non-restatement firms. For the regres- ment than non-restatement firms, again
sion using CSP People Strengths as the suggesting the restatement firms may be
dependent variable, we found that the more accountable in the period follow-
Post variable is significantly positively ing restatement by focusing in on CSP
related at p>.05 indicating that for all strengths. For our CSP People Weak-
firms CSP People Strengths significantly nesses regression, the only significant
increased in the two years following the variable that we found was the Post vari-
restatement period. We also found that able at p<.01, indicating that for all
the interaction term of ROA*Match is firms CSP People Weaknesses signifi-
significantly negatively related at p<.01, cantly increased in the two years follow-
indicating that the effect of ROA on ing the restatement period.
CSP People Strengths is greater for re-
statement firms than non-restating firms,
supporting hypothesis 2. The interaction SUMMARY AND DISCUSSION
term of ROA*Post*Match is also sig-
nificantly positively related to CSP Peo- This study was undertaken to investigate
ple Strengths at p<.01, indicating that CSP in restatement firms along with in-
the effect of ROA on CSP People vestigating the relationship of CSP to FP
21. 124 L. Mahoney, W. LaGore, J. A. Scazzaro / Issues in Social and Environmental Accounting 1 (2008) 104-130
Table 7
Coefficient (Standard Error) of Panel Data Analysis for CSP Using a One Year
Lag between the Dependent Variable and Independent Variables
Dependent Total CSP People CSP People CSP People Weak-
Strengths ness
Independent
ROA .021 .018 .015 .014 -.006 .011
Match .268 .446 .431 .394 .214 .202
Post -.042 .197 .324 .153* .378 .128**
ROA*Match -.093 .028** -.084 .022** .001 .018
ROA*Post -.015 .025 -.007 .019 .005 .016
Match*Post -.715 .290* -.881 .225** -.212 .188
OA*Post*Match .107 .034** .093 .026** -.010 .022
Control
Debt-to-Equity .213 .821 .793 .668 .576 .419
Assets .001 .000* .001 .000** .001 .000**
2
R .166 .283 .203
Wald chi-square 41.06** 80.66* 54.03**
Panel data model type
Number of Firms 88 88 88
Number of Observa-
tions 352 352 352
*p<.05
**p<.01
for these same firms. Consistent with We also compared restatement firms
prior research on accountability and dis- with matched non-restating firms in our
closure (Mahoney et al., 2008), we panel data analysis. We found that CSP
found Total CSP after restatement of Strengths, CSP Weaknesses, and CSP
earnings was significantly lower than the People Strengths for restatement firms
average Total CSP before restatement. showed a greater increase than non-
In particular, even though CSP Strengths restatement firms. For Total CSP Peo-
increased, it was offset by a greater in- ple, we found that restatement firms
crease in CSP Weaknesses. This in- showed a greater decrease than non-
crease in strengths may be due to the restatement firms. For CSP Product
efforts by the firms to be accountable Strengths, we found that while restate-
and improve the reputation of the firm. ment firms increased slightly, non-
However, this may have been offset by restating firms showed a significant de-
the negative impact of transparency sur- crease. These findings are consistent
rounding financial restatement. These with prior research on reporting failure
findings support hypothesis 1 for Total that show that restating firms take steps
CSP which differs before and after re- to improve corporate governance mecha-
statement. nisms following restatement in order to
restore credibility and transparency
22. L. Mahoney, W. LaGore, J. A. Scazzaro / Issues in Social and Environmental Accounting 1 (2008) 104-130 125
(Farber, 2005; LaGore, 2008) and pro- tiques of KLD’s perspective on CSP
vide addition support for hypothesis 1. would aid in the development of this
research stream.
We also find support for hypothesis 2,
since a stronger positive relationship The sample selection bias is also a po-
exists between ROA on CSP Strengths tential alternative explanation of the re-
for restatement firms than non-restating sults. There are some possible selection
firms. In particular, we find that this biases in our final sample of restatement
effect is a result of the People dimension firms since the research design requires
of CSP with significant relationships for each sample firm to have data for a con-
Total CSP People and CSP People secutive 5-year period, the two years
Strengths while no relationship was before and after the restatement an-
found for any dimension of CSP Prod- nouncement. Thus, the final sample
uct. These results provide further sup- tends to include surviving and larger
port for the previous literature on the firms that may be perceived as more re-
positive relationship between CSP and liable. Therefore, the external validity
FP and that CSP and FP may be mutu- of the study may be in question as the
ally reinforcing organizational activities results may not generalize to the overall
(Orlitzky, 2008). population of publicly traded companies.
On the other hand, larger firms receive
Like all research, ours has limitations more media coverage and regulatory
associated with the measures, methodol- attention than smaller firms and there-
ogy and sample size. The use of KLD fore may be under more pressure to
ratings to measure CSP are questionable change financial reporting and corporate
(Chatterji and Levine, 2006; Chatterji, et social performance following a restate-
al., forthcoming; Orlitzky and Swanson, ment in order to restore the public’s trust
2008; Porter and Kramer, 2006) since in their financial reporting. The results
they are determined by an independent of this analysis are encouraging because
firm and are the result of Kinder, Lyden- the prospect of a positive CSP and FP
berg, Domini Research & Analytics’ ownership links means that even restate-
definition and evaluations of CSP. Pre- ment firms can be socially responsible
vious research has found that while KLD and financially successful following the
weakness ratings are a good summary of period of restatement.
past environmental performance, KLD
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