Author(s): Eko Budi Santoso, Basuki, Isnalita,
This study examines the relationship between social responsibility disclosure and earnings management. The research is based on the paradox where companies that actively carry out social responsibility are considered companies that behave ethically in their business practices are actually involved in financial fraud scandals. This study uses data on companies in Indonesia that publish GRI-based social responsibility disclosures. The results show that the disclosure of social responsibility is positively associated with discretionary and real earnings management. This means that companies in developing countries practice earnings management when they disclose social responsibility. In addition, this study also found a complementary relationship between accrual and real earnings management. The results of this study indicate that stakeholders need to be careful not to believe that companies disclosing social responsibility are companies that also behave ethically in their business practices.