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ABSTRACTManuscript Type: EmpiricalResearch Question/Issue: This paper investigates the connection between earnings management and corporate social responsibility (CSR). We argue that earnings management practices damage the collective interests of stakeholders; hence, managers who manipulate earnings can deal with stakeholder activism and vigilance by resorting to CSR practices.Research Findings/Insights: Using archival data from a multi‐national panel sample of 593 firms from 26 countries between 2002 and 2004, we find a positive impact of earnings management practices on CSR; this relationship holds for different robustness checks. Also, we demonstrate that the combination of earnings management and CSR has a negative impact on financial performance.Theoretical/Academic Implications: This study draws on a generalized agency theory where managers are seen as the agents of all stakeholders and the earnings management literature to highlight that CSR can be used to garner support from stakeholders and, therefore, provides an opportunity for entrenchment to those managers that manipulate earnings. As such, it suggests new avenues of research for both the corporate governance literature, as well as for the stakeholder perspective.Practitioner/Policy Implications: This study offers insights for policy makers and managers interested in enhancing CSR. For managers, our findings suggest that projecting a socially‐friendly image in order to disguise earnings management cannot be sustained over time due to the detrimental effect on financial performance. In addition, this study provides a warning signal to policy makers that certain practices geared toward raising a firm's CSR may simply be a mechanism for hindering other devious practices.

Using data from 3,638 Spanish firms between 1996 and 2000, this article studies the relationship between the presence of large shareholders in the ownership structure of firms and R&D investment. Consistent with our theoretical contention, our results indicate that the impact of large shareholders on the R&D investment is (1) negative when blockholders are banks, (2) positive when blockholders are non‐financial corporations and (3) null when blockholders are individuals. In addition, we find a systematic negative relationship between the number of blockholders and R&D investment. Finally, we extend our study by analysing the influence that the combined effect between blockholder type and R&D investment has on the firm's economic performance. Results of this work provide relevant implications for policy makers and academic research.