Earnings Management, Tax Avoidance and Corporate Social Responsibility: Malaysia Evidence

Abstract

This proposed study focuses on the issues of managerial discretions, managerial entrenchment strategy and corporate social responsibility (CSR) in Malaysia with the basis of generalized agency theory where managers are inclined to satisfy their own interests at the expense of other stakeholders. This proposed study aims to scrutinize the utilisation of CSR as a strategic managerial entrenchment strategy against the cost of managerial discretions, namely earnings management (EM) and tax avoidance (TA) engaged by irrational managers. Specifically, this proposed study employs stakeholder-agency theory by examining the irrational managers’ motivation in over-invests in CSR activities so as to distract stakeholders’ attention from monitoring their opportunistic behaviour and securing their jobs. Further, it extends the study of managerial entrenchment strategy by incorporating managerial ownership which could magnify the relationship.