Ethical climate, social responsibility, and earnings management
Document Type
Journal article
Source Publication
Journal of Business Ethics
Publication Date
1-1-2015
Volume
126
Issue
1
First Page
43
Last Page
60
Keywords
Earnings management, Ethical climate, Hong Kong, Perceived importance of ethics and social responsibility
Abstract
This study proposes and tests a model of the relations among corporate accountants' perceptions of the ethical climate in their organization, the perceived importance of corporate ethics and social responsibility, and earnings management decisions. Based on a field survey of professional accountants employed by private industry in Hong Kong, we found that perceptions of the organizational ethical climate were significantly associated with belief in the importance of corporate ethics and responsibility. Belief in the importance of ethics and social responsibility was also significantly associated with accountants' ethical judgments and behavioral intentions regarding accounting and operating earnings manipulation. These findings suggest that perceptions of ethical climate, usually presumed to reflect the "tone at the top" in the organization, lead accounting professionals to rationalize earnings management decisions by adjusting their attitudes toward the importance of corporate ethics and social responsibility. This is the first study to document a relationship between organizational ethical climate and professional accountants' support for corporate ethics and social responsibility, and also the first study to document that industry accountants' views toward corporate ethics and social responsibility are associated with their willingness to manipulate earnings. The findings have important implications, suggesting that organizational efforts to enhance the ethical climate and emphasize the importance of corporate ethics and social responsibility could reduce the prevalence of earnings manipulation.
DOI
10.1007/s10551-013-1989-3
Print ISSN
01674544
E-ISSN
15730697
Publisher Statement
Copyright © Springer Science+Business Media Dordrecht 2013
Access to external full text or publisher's version may require subscription.
Full-text Version
Publisher’s Version
Language
English
Recommended Citation
Shafer, W. E. (2015). Ethical climate, social responsibility, and earnings management. Journal of Business Ethics, 126(1), 43-60. doi: 10.1007/s10551-013-1989-3