Does corporate social disclosure affect earnings quality? Empirical evidence from Tunisia

The aim of our research is to investigate whether voluntary social disclosure is related to earnings quality. The study is performed on a sample of Tunisian Stock Market (TSM) listed companies over ten years (2002-2011). To achieve the aim of this study, content analysis and statistical analysis were used. Content analysis by sentences count was used to determine the level of social disclosure of Tunisian companies. Considering four attributes of earnings quality (Earnings management, conservatism, value-relevance of earnings and accruals quality), we provide strong evidence that social disclosure is positively associated with the degree of earnings management and negatively associated with the degree of conservatism. Accordingly, we conclude that social disclosure doesn’t contribute to financial reporting quality. It is used by managers as a mechanism to cover-up their earnings management practices in order to reinforce firm legitimacy.