Climate policy uncertainty and earnings management

Viet Tran

Finance Research Letters, 2025, vol. 71, issue C

Abstract: I investigate how climate policy uncertainty (CPU) influences earnings management (EM). The analysis reveals that high levels of CPU are associated with a reduction in the absolute value of abnormal discretionary accruals. This relationship remains robust across two instrumental variable approaches, several internal and external governance factors, and various alternative measures of EM. Additionally, I find that the negative association between CPU and EM is more pronounced in firms with a higher likelihood of financial distress, greater institutional investor monitoring, and stronger corporate social responsibility (CSR) practices.

Keywords: Climate policy uncertainty; Earnings management; Discretionary accruals management (search for similar items in EconPapers)
JEL-codes: G30 G32 M41 Q54 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:71:y:2025:i:c:s1544612324014223

DOI: 10.1016/j.frl.2024.106393

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