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| Author: | Petrovits, C.M. |
| Title: | Corporate-sponsored foundations and earnings management |
| Journal: | Journal of Accounting & Economics
2006 : SEP, VOL. 41:3, p. 335-362 |
| Index terms: | financial reporting corporate philanthropy foundations earnings management USA |
| Language: | eng |
| Abstract: | This paper deals with the strategic use of corporate philanthropy programs to achieve financial reporting objectives. Corporate-sponsored foundations allow managers to maintain stable levels of giving to charitable causes while providing substantial discretion as to the amount of contribution expense recorded on the income statement. It is found that firms reporting small earnings increases make income-increasing discretionary foundation funding choices. This result is associated with firms having strong equity market incentives to manage earnings. The evidence is consistent with firms using their charitable foundations as off-balance sheet reserves. |
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