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Socially Responsible Companies in Lithuania: When Values Become the Foundation of Financial Integrity

By Dr. Diana Bachtijeva | February 4, 2026
Business Insights | Case Studies | Economics and Finance

Does corporate social responsibility (CSR) in business truly align with financial transparency? A study conducted in Lithuania shows that socially responsible companies are less likely to engage in aggressive earnings manipulation. An analysis based on financial statements of medium and large Lithuanian companies confirmed that an ethical approach to business can coexist with fair accounting practices. This research not only revealed a link between value-driven attitudes and financial behaviour but also challenged the assumption that CSR is merely a reputational tool.

Introduction

In today’s business environment, increasing emphasis is placed not only on financial success but also on social responsibility. Companies communicate their contributions to sustainable development, employee well-being, or environmental protection. Yet a critical question remains: do these declarations genuinely reflect the substance of business operations? Financial integrity is inseparable from accounting practices and the accuracy of disclosed information. Earnings management refers to the adjustment of accounting or operational indicators in order to present a more favourable company image. Although such practices often do not violate legal regulations, they are considered unethical as they distort financial reporting and mislead stakeholders. While CSR is frequently associated with ethical conduct, in practice it may also serve as a reputation-enhancing strategy. Therefore, analysing the financial behaviour of companies that claim social responsibility helps assess whether these statements are grounded in genuine values or merely communicative decisions. Previous research offers mixed findings—some studies highlight a positive link between CSR and ethical financial behaviour, while others emphasise its instrumental and reputational character.

Aim and Methodology

The aim of this research was to determine whether Lithuanian companies that publicly declare social responsibility are less likely to employ earnings management techniques compared to those that do not. Until now, no empirical research of this kind had been conducted in Lithuania. Hence, the study sought to identify whether a conceptual (value-based) or opportunistic (image-based) approach to CSR predominates. To evaluate financial behaviour, two widely recognised models were used: the Jones model modified by Dechow et al. (1995), to assess accrual-based earnings management, and the Roychowdhury (2006) model to detect real earnings management through sales manipulation, overproduction, and cuts in discretionary expenses. The sample comprised medium and large Lithuanian companies that prepared financial statements according to national accounting standards. A total of 186 financial statements over a five-year period were analysed. Companies were divided into two groups: those that disclosed CSR-related information, and a control group that did not make such declarations. Data were collected from publicly available financial statements prepared under Lithuanian business accounting standards. CSR practices were identified based on companies’ non-financial disclosures, while the control group included firms with no such information available in reports or public channels.

Main Findings

The study revealed notable differences between socially responsible companies and others in Lithuania. Regarding accrual-based earnings management, the results show that CSR companies applied such methods less frequently and less aggressively—their indicators were on average 2.3 times lower than those of non-CSR firms. This suggests greater stability in accounting data and enhanced financial transparency. In terms of real earnings management, the trends were similar but less pronounced. Roughly 40% of socially responsible companies showed signs of short-term sales or production adjustments, compared to nearly 50% in the control group. Sector-level analysis revealed that overproduction—used to artificially reduce cost of goods sold—was 1.5 times less common in socially responsible firms. By contrast, the incidence of cuts to discretionary spending (e.g., on advertising or training) was comparable across both groups at around 15%, with no statistically significant difference. It is important to note that these patterns were consistent throughout the study period, rather than being driven by isolated years. This consistency strengthens the reliability of the study’s findings. Overall, the results suggest that socially responsible companies are less likely to manipulate financial data and tend to do so to a lesser extent than their counterparts, indicating that CSR in Lithuania is more frequently grounded in authentic values rather than image-building alone.

Implications for Business

The findings indicate that in Lithuania, CSR is more often linked to genuine values than to superficial branding. Companies that declare social responsibility tend to behave more ethically and are less inclined to manipulate financial results. This sends a clear signal to investors—these companies are more trustworthy and ethical; to business partners—they are likely to maintain higher levels of transparency; and to regulators and the public—that CSR in Lithuania is not merely a formality. This study not only fills an empirical gap in the Lithuanian context but also demonstrates that a value-based approach to business can be reflected in responsible financial practices. Here, social responsibility becomes not a public relations tool but an internal principle of conduct.

References

Author’s Note:

This article is based on the findings of the author’s previously published academic research. The content has been adapted, rewritten, and reframed for a professional and business-oriented audience. The article is original and has not been published in this format elsewhere.