Muhammad Ilham PAKAWARU, Arung Gihna MAYAPADA, Nadhira AFDALIA, Andi Ainil Mufdah TANRA, Muhammad AFDHAL / Journal of Asian Finance, Economics and Business Vol 8 No 2 (2021) 0903–0909 903 903 Print ISSN: 2288-4637 / Online ISSN 2288-4645 doi:10.13106/jafeb.2021.vol8.no2.0903 The Relationship of Corporate Social Responsibility (CSR) Disclosure and Earnings Management: Evidence from Indonesia Muhammad Ilham PAKAWARU 1 , Arung Gihna MAYAPADA 2 , Nadhira AFDALIA 3 , Andi Ainil Mufidah TANRA 4 , Muhammad AFDHAL 5 Received: November 05, 2020 Revised: January 05, 2021 Accepted: January 15, 2021 Abstract The relationship between corporate social responsibility (CSR) and earnings management is still a debate. Several previous studies showed that CSR is a determinant of earnings management. Meanwhile, others revealed the reverse. Therefore, this study aims to investigate the effect of CSR disclosure on earnings management and the effect of earnings management on CSR disclosure. This study was conducted with mining companies listed on the Indonesia Stock Exchange (IDX) in the 2016-2019 period. The research data was analyzed using multiple linear regression analysis. The data is obtained from financial statements, annual reports, and sustainability reports. The results reveal that there is a positive relationship between CSR disclosure and earnings management. This study also shows that the relationship model of CSR disclosure and earnings management is recursive. This finding implies that CSR disclosure is a tool used by management to cover up unethical actions from stakeholders. These results verify the agency theory and opportunist hypothesis regarding the relationship between CSR and earnings management. The novelty of this study lies in highlighting the recursive model of the relationship between CSR and earnings management. Keywords: Corporate Social Responsibility Disclosure, Earnings Management, Recursive Model JEL Classification Code: M14, M41, Q56 their business activities in and related to natural resources must carry out social and environmental responsibility. Even so, the implementation of these regulations is still very minimal. Cases of exploitation of natural resources and environmental pollution have increased in Indonesia (Rokhmawati & Gunardi, 2017). Besides, the absence of standards regulated by law regarding the format of corporate social responsibility (CSR) reporting also makes the quantity and quality of CSR reporting still vary in Indonesia (Muliati et al., 2020; Ridho, 2017; Ridwan & Mayapada, 2020). CSR is represented as an ethical act by the company to all stakeholders, namely investors, creditors, employees, suppliers, customers, government, society, and the surrounding environment. The concept of CSR based on stakeholder theory stated that the firm should accommodate all stakeholder interests to ensure operating activities’ sustainability. Based on this concept, reliable financial reporting is part of the implementation of CSR. Reliable financial reporting is financial reporting that is free from earnings management actions. Earnings management is the use of accounting techniques to produce financial statements that present an overly positive 1 First Author. Lecturer, Accounting Department, Faculty of Economics and Business, Universitas Tadulako, Indonesia. Email: pakawaruilham4@gmail.com 2 Corresponding Author. Lecturer, Accounting Department, Faculty of Economics and Business, Universitas Tadulako, Indonesia [Postal Address: Soekarno Hatta Street, KM 9, Tondo, Mantikulore, Palu, Central Sulawesi Province, 94119, Indonesia] Email: arunggihna@gmail.com 3 Lecturer, Accounting Department, Faculty of Economics and Business, Universitas Tadulako, Indonesia. Email: nadhira.afdalia88@gmail.com 4 Lecturer, Accounting Department, Faculty of Economics and Business, Universitas Tadulako, Indonesia. Email: ainilmufidah.am@gmail.com 5 Lecturer, Accounting Department, Faculty of Economics and Business, Universitas Tadulako, Indonesia. Email: afdhalafdhal499@gmail.com © Copyright: The Author(s) This is an Open Access article distributed under the terms of the Creative Commons Attribution Non-Commercial License (https://creativecommons.org/licenses/by-nc/4.0/) which permits unrestricted non-commercial use, distribution, and reproduction in any medium, provided the original work is properly cited. 1. Introduction Law No. 40 of 2007 concerning Limited Liability Companies regulates that Indonesian firms that carry out