The Impact of Social Responsibility Activities and Financial Ratio of Chinese Companies on Earning Management

[Purpose]This study aims to study how Chinese companies’ corporate social responsibility (CSR) activities and financial ratios affect earning management. In general, companies that perform corporate social responsibility (CSR) activities have an incentive not to earning management, and certain variables among financial ratio variables using corporate financial statements can be useful for managers’ earning management behavior. [Methodology]Among Chinese listed companies, the impact of corporate social responsibility (CSR) activities and financial ratios on earning management from 2016 to 2020 was empirically analyzed for A shares of the Shenzhen Exchange. [Findings]As a result of empirical analysis, it was verified that financial ratio indicators that have a significant impact on earning management include growth ratio, profitability ratio, liquidity and stability ratio, and activity ratio. [Implications]According to these financial ratio variables, it is believed that earning management can be controlled in advance by utilizing financial ratio variables that affect profit adjustment and social responsibility activities.