Does environmental, social, and governance rating affect firms’ real earnings management

Keping Wu (), Dongmin Kong and Wei Yang

Finance Research Letters, 2024, vol. 67, issue PA

Abstract: We examine whether and how ESG ratings influence real earnings management (REM) in firm in the context of China. We find a significant negative correlation between ESG ratings and REM, suggesting that higher ESG ratings improve corporate governance and transparency, thereby reducing REM. Our findings also reveal that internal control quality, external supervision, analyst attention, and corporate governance enhance the negative impact of ESG ratings on REM. Our findings provide empirical insights for investors and policymakers in emerging markets on enhancing corporate transparency and governance through ESG performance.

Keywords: ESG Rating; Real earnings management; Mechanism (search for similar items in EconPapers)
JEL-codes: G18 M14 M21 M41 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:67:y:2024:i:pa:s1544612324007943

DOI: 10.1016/j.frl.2024.105764

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