The effect of internal control and corporate social responsibility on conditional accounting conservatism: Evidence from France

• Published date: 01 April 2023
• Author: Mounia Boulhaga,Hany Elbardan,Moataz Elmassri
• Date: 01 April 2023
• DOI: http://doi.org/10.1002/jcaf.22605

Received:  July  Revised:  November   Accepted:  November 

DOI: ./jcaf.

RESEARCH ARTICLE

The effect of internal control and corporate social

responsibility on conditional accounting conservatism:

Evidence from France

Mounia Boulhaga1Hany Elbardan2,3Moataz Elmassri4,5

Faculty of Economics and Management

of Sfax, University of Sfax, Sfax, Tunisia

Accounting & Finance Department,

Bournemouth University Business

School, Poole, UK

Faculty of Commerce, Alexandria

University, Alexandria, Egypt

United Arab Emirates University, Al

Ain, Abu Dhabi, United Arab of Emirates

Accounting Department, Faculty of

Commerce, Zagazig University, Zagazig,

Egypt

Correspondence

Hany Elbardan, Bournemouth University

Business School, UK.

Email: hany.elbardan@gmail.com

Abstract

This study examines the impact of internal control (IC) and corporate social

responsibility (CSR) on conditional accounting conservatism (CAC). We employ

legitimacy theory to understand whether managers adopt CSR reports and IC

systems to seek legitimacy through symbolic actions or whether they do so to

provide substantive actions to their stakeholders.

We adopt a multivariate analysis for a sample of  Frenchcompanies belonging

to the SBF  index during the period between  and . All accounting

and stock market information is extracted from the Thomson Reuter database

(Datastream) and the Thomson Reuters ASSET ESG database. We found that

both IC and CSR have a negative and significant impact on CAC; hence, man-

agers may use CAC levels as a legitimizing tool for corporate activities. French

companies are generally characterized by strong IC systems, suggesting a low

demand for conditional conservatism. Socially responsible companies may have

fewer agency issues and therefore will not practiceaccounting conservatism (AC)

in a pronounced way. Distinct from the previous literature, our study exam-

ines the impact of IC as well as CSR on CAC, which provides useful insights

regarding how stakeholder pressure, in terms of reporting on social responsibil-

ity and maintaining effective control systems, interacts with and impacts upon

managers’ decisions to adopt CAC in the French context. Given the position of

France after Brexitand the new laws adopted regarding an emphasis on the social

dimension in corporate reporting, protecting stakeholders’ interests, and adopt-

ing conservatism, it is worth using such a context to gain a better understanding

of AC, as this will enrich the literature.

KEYWORDS

conditional conservatism, corporate social responsibility (CSR), generalized method of

moments (GMM), legitimacy theory, internal control

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provided the original work is properly cited, the use is non-commercial and no modifications or adaptations are made.

©  The Authors. Journalof Corporate Accounting & Finance published by Wiley Periodicals LLC.

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