Mandatory Disclosure of Corporate Social Responsibility and the Quality of Earnings Management

Round 1

Reviewer 1 Report

The article examines the relationship between mandatory CSR disclosure and earnings management in Chinese companies with mandatory CSR disclosure with considerable statistical support. However, the literature base of the article needs to be improved, as only 18 references appear in it, despite the fact that the number of studies on the relationship between CSR and earnings management has increased particularly in the last 5 years. These need to be included even if they do not include mandatory CSR disclosure and do not examine Chinese companies but the experiences of other countries. The article points out that in Western countries CSR disclosure is mostly voluntary, although many stock exchanges have made it mandatory for listed companies. There is not a single reference in the discussion section of the paper, although it should point out the similarities and differences between the results of this research and the findings of previous research. It is particularly interesting to see how the research differs from the cited Wang et al. (2018) paper.

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Reviewer 2 Report

I find the paper topic interesting.

The literature covered highlight that authors know the research topics but   some sources are old (only two from 2022 and none from 2023). An extension could offer a wide view of new approach and methods.

The methodologies are appropriate to the proposed objective of research paper  and well presented.  We suggest to verify the acronym ADA in table 2 and 6 because it is not explained in the text. It is interesting the analysis of heterogeneity of analyst coverage and heterogeneity of institutional shareholdings.

For the future research will be interesting to explore also the effects of economic crisis, taking into consideration that the period analysis include the period of international financial crisis from second part of 2007 years.

Conclusions are well presented and include also the policy implication.

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Reviewer 3 Report

The authors should include a greater number of references.

There are variables that can have an impact beyond just the management of CSR benefits and may not be related to what the manuscript refers to. Therefore, the authors should reflect the scenario in which the companies under study operate.

The authors should check if the model can focus on the impact of CSR on benefits, growth, returns, size, and other variables of the companies under study.

The graphs should provide a clearer visualization of the research results.

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Reviewer 4 Report

Dear Author/s thank you for the opportunity to read this study, aiming to investigate the role of mandatory CSR disclosure towards the earning management attitude of companies, in the Chinese context. In general, the study presents some strengths, mainly from an empirical point of view, but also some weaknesses relative to the theoretical framework and related hypotheses. Following are some comments that could improve the current version of the study. 

 

Introduction 

Relative to the gap, the introduction mentions several times that the study is justified by some main factors, i.e. majority of the study focuses on Western countries, the adoption of the theory of information asymmetry by prior studies, alongside heterogeneity bias. However, often the introduction does not mention these prior studies. See for example p.1, “Consequently, prior studies investigating the impact of CSR information disclosure have heavily relied on enterprises data on Western developed countries”. This also happens on the following page, lines 86-87. Accordingly, the novelty advocated should be adequately supported.  

 

Theoretical background 

The study states that prior investigations are based mainly on information asymmetry, while one of the contributions of this study is to consider the "external view" and the agency theory. 

The first section discusses only the CSR disclosure and its impact on earning management activities. Is not clear which theoretical background should link mandatory disclosure, earnings management activities, and media and regulators monitoring and sanctioning power.  

I would suggest authors to better focus on the conceptual framework and theories used to explain the expected relationships.  There might be other relevant frameworks to explain why CSR disclosure can mitigate opportunistic behaviors by managers.  

The H.2 is not clear to follow. Some acronyms not specified are used.   

The H.3 hypothesis looks at regulators, but the prior text talks about media as additional external constraints. 

This section needs to be revised, in order to better connect theories and research questions.   

 

Method 

This section is well structured, the research design is robust and well-performed. However, some points should be considered:  

1) Dep. variables proxying earnings management activities how are supported by prior investigations? 

2) The Mechanism analysis should be better explained. 

3) Table 6. there are some mismatches between the variables' labels and Eq.4 

4) The heterogeneity analysis also is relevant, even if not adequately introduced before. Maybe this might also intercept the theoretical background sections.
From prior equations (1,2) some controls change over models, this also shoul be addressed.  

 

Discussion   

At this stage, a clear discussion of the theoretical contribution of the study to the cited framework of information asymmetry and agency theory is missing. This section should discuss the results obtained and relative implications for this research stream, also confronting obtained results with prior studies (i.e. Wang for context comparability, given that is cited several times).  

  

  

Conclusion  

Limitations and further research agenda should be improved.  

Finally, more relevant research in this area should be considered to strengthen the theoretical background and the study’s contributions to the academic debate. 

The overall quality of English language is sufficient.

 

Author Response

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Round 2

Reviewer 1 Report

The authors have completed the literature review section, the discussion section and the conlusion section of the paper, making it more complete. Ten more references were added to the list of references cited, bringing the total number of references cited to 28, which is still below the number of references cited in high-quality journal articles. I propose to add to the paper additional relevant literature references on the impact of mandatory CSR disclosure in China. E.g., Xue et al (2023) 10.1016/j.pacfin.2022.101919; Wang & Wang (2023) 10.1108/MAJ-09-2022-3681; Huang et al (2023). 10.3389/fenvs.2023.1028745; Guo et al (2022). 10.1016/j.ribaf.2022.101733; Jiang & Zhang (2022) 10.1016/j.techfore.2022.121646; Makosa et al (2020) 10.1002/jcaf.22467; 

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Reviewer 3 Report

The authors must adjust the model to establish a better relationship among variables, which was the recommendation in the previous review. Additionally, they should include a greater quantity of references, as the current number is still insufficient.

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Reviewer 4 Report

Dear Authors, the manuscript has been strengthened according to the suggestions made, both in relation to theoretical and methodological aspects.

The current version presents minor editing to revise. 

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Round 3

Reviewer 3 Report

Thank you for the adjustment at the manuscript.