Environmental, social and governance performance and earnings management – The moderating role of law code and creditor's rights

Rajesh Pathak and Ranjan Das Gupta

Finance Research Letters, 2022, vol. 47, issue PA

Abstract: This study examines whether environmental, social, and governance (ESG) engagement affects firms’ earnings management (EM) behavior in a multicountry set up. Employing the Tobit and panel regression framework and co`nsidering performance-matched measure of EM, we show that ESG performance substantially reduces opportunistic firms’ EM behavior. Moreover, the civil law code and superior credit rights negatively moderate the ESG–EM relationship. Empirical findings are robust and survive the use of alternative methodology and endogeneity test.

Keywords: Earnings management; ESG performance; Legal origin; Creditors’ rights (search for similar items in EconPapers)
JEL-codes: C G12 G14 M14 M41 Q56 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:47:y:2022:i:pa:s1544612322001453

DOI: 10.1016/j.frl.2022.102849

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