Does earnings management constrain ESG performance? The role of corporate governance

Yusuf Babatunde Adeneye (), Setareh Fasihi (), Ines Kammoun () and Khaldoon Albitar ()
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Yusuf Babatunde Adeneye: Universiti Malaysia Kelantan
Setareh Fasihi: Payame Noor University (PNU)
Ines Kammoun: University of Sfax
Khaldoon Albitar: University of Portsmouth

International Journal of Disclosure and Governance, 2024, vol. 21, issue 1, No 5, 69-92

Abstract: Abstract Responding to the calls in both earnings management and sustainability literature to examine corporate governance patterns, this study fills the sustainability literature gap by shedding light on the moderating role of corporate governance on earnings management and environmental, social and governance performance. Using a sample of UK firms listed on the London Stock Exchange for the period 2016–2020, we find considerable evidence that earnings management reduces environmental, social and governance performance. Importantly, we find that board gender diversity among other corporate governance mechanisms is stronger and more effective in attenuating the negative effects of earnings management on environmental, social and governance performance significantly. We find support for the agency theory that corporate governance mechanisms reduce the managerial exploitation of resources required for sustainable investments and sustainability performance.

Keywords: Earnings management; Environmental; Social; Governance performance; Corporate governance (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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DOI: 10.1057/s41310-023-00181-9

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