Sulochana Dissanayake, Roshan Ajward and Dilini Dissanayake
This study examines whether managers adopt corporate social responsibility (CSR) disclosures to suppress earnings management practices and whether corporate governance mechanisms…
Abstract
Purpose
This study examines whether managers adopt corporate social responsibility (CSR) disclosures to suppress earnings management practices and whether corporate governance mechanisms could limit such practices.
Design/methodology/approach
A quantitative approach was followed, in which secondary data from listed firms from 2014 to 2019 were gathered. Descriptive statistics and inferential techniques were performed, which included correlation, ordered logistic regression and 2SLS panel regression analyses.
Findings
The findings indicate that firms use CSR disclosure to conceal managers' opportunistic behaviour via earnings management as an entrenchment strategy and that corporate governance mechanisms could significantly constrain such behaviour.
Research limitations/implications
This study goes beyond the conventional agency theory by incorporating additional theoretical perspectives from stakeholder and legitimacy theories, resulting in a multi-theoretical perspective in conceptualizing the study.
Practical implications
The findings are expected to have significant policy implications, especially in limiting the opportunistic use of CSR disclosures and reducing earnings management practices to safeguard stakeholders' interests and ensure the sustainability of business entities.
Originality/value
The levels of CSR and board governance practices are captured using comprehensive indices. Moreover, earnings management was operationalized using both accrual-based and real earnings management proxies. Furthermore, while addressing an empirical dearth noted, the findings provide significant policy implications for limiting managers' opportunistic and unethical use of CSR disclosures with corporate governance mechanisms.
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Ashesha Paveena Weerasinghe and Sulochana Dissanayake
This paper aims to examine whether CEOs with an engineering background increase corporate investment efficiency (CIE). The authors further investigate the role of engineering…
Abstract
Purpose
This paper aims to examine whether CEOs with an engineering background increase corporate investment efficiency (CIE). The authors further investigate the role of engineering directors on boards of the above association.
Design/methodology/approach
Drawing from upper-echelon theory, which suggests that corporate outcomes are a reflection of its top management characteristics, the authors hypothesise a positive association between engineer CEOs and CIE and a positive moderation role of the proportion of engineer directors on boards in the above association. The authors examine this link using a sample of Australian Securities Exchange 200 firms from 2015 to 2022. Engineer CEO data is hand-collected from corporate annual report biographies and investment efficiency is a measure that captures whether the investments are maintained at optimal levels relative to industry-year benchmarks, following the approaches of Biddle et al. (2009), Chen et al. (2011) and the average values of both models.
Findings
The results indicate support for the hypotheses, revealing that firms managed by engineer CEOs have higher investment efficiency than their counterpart firms. This association is exacerbated in the presence of a higher proportion of engineer directors on boards. The results are robust to year and industry-fixed effects, propensity score matching, alternative measures of investment efficiency and robust standard errors. Our results also remain valid for an industry sub-sample using certain industries in which engineering expertise maybe more desirable (e.g. metals and mining).
Research limitations/implications
By showing that engineer CEOs are significantly associated with CIE, the authors contribute to upper-echelon literature examining the link between CEO characteristics and corporate outcomes, particularly, investment decision efficiency. The influence of engineering background on corporate outcomes is less examined in the literature; thus, the authors contribute to this thin literature.
Originality/value
The findings are informative to potential investors in evaluating firms’ investment efficiency before investing in firms. For example, firms with engineer CEOs are likely to maintain efficient investment levels in future years.