Does real earnings management affect a firm's environmental, social, and governance (ESG), financial performance, and total value? A moderated mediation analysis

Ahmed Mohamed Habib ()
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Ahmed Mohamed Habib: Independent Research

Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, 2024, vol. 26, issue 11, No 44, 28239-28268

Abstract: Abstract This study examines the linkage between real earnings management (REM); environmental, social, and governance performance (ESGP); financial performance (FP); and total enterprise value (TEV). This study employs multiple methods to accomplish its goals, such as the algorithm of PLS-SEM, regression analyses, and additional analyses. The results confirm that firms adopting the REM strategy are likely to have lower ESGP and TEV, whereas those adopting the ESG strategy are likely to have higher TEV and FP. Using moderated mediation analysis, we also find that ESGP and FP mediate the relationship between REM strategies and TEV. This finding underscores the significance of ESGP and FP as crucial aspects that should not be disregarded when seeking to enhance firm value. The results also suggest a moderate impact of FP on the connection between ESGP and TEV. This finding implies that FP plays a crucial role in enhancing the connection between a firm's ESGP and its TEV. This study contributes to the current literature by elucidating the effect of REM and ESG strategies on a firm's total value, which is a subject that has received limited attention thus far. Additionally, this study examines the moderated mediation effects, offering valuable insights to decision-makers in organizations. These insights can aid in the ongoing improvement process and promote sustainability. Furthermore, the results may affect trading processes and financing facilities because investors and financiers are expected to pay more attention to companies that care closely about sound strategies to achieve attractive financial yields from their investments or financing.

Keywords: Earnings management; ESG performance; Environment; Social responsibility; Governance; Multivariate analysis (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s10668-023-03809-6

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