Does corporate social responsibility drive better performance by adopting IFRS? Evidence from emerging market

As switching from GAAP to IFRS causes changes to accounting quality, predictability, and crash risk, this paper empirically investigates whether firms involved in corporate social responsibility (CSR) performed better under IFRS adoption. Our sample is broken down into three sub-periods (2002–2005, 2010–2012, and 2013–2015) to meet the EU mandate IFRS in 2005 and Taiwan in 2013, respectively. We find mandatory IFRS adoption results in reducing earnings management, improving in forecast accuracy leading to enhanced earnings predictive ability, and mitigating crash risk. Furthermore, CSR firms behave responsibly in constraining earnings management and increasing financial reporting transparency through interaction with IFRS. Following IFRS adoption, crash risk is significantly improved in Over-The-Counter (OTC) companies and the enhanced transparency attracts increased foreign investment to the OTC market. Finally, the results on IFRS and CSR interaction provide reference for global capital markets, especially for major capital markets without mandatory IFRS adoption, e.g., the US and Japan.