EconPapers    
Economics at your fingertips  
 

Mandatory versus voluntary: The real effect of ESG disclosures on corporate earnings management

Xue Cui, Ruochen Li, Shuyu Xue and Xiaomei Zhang

Journal of International Money and Finance, 2025, vol. 154, issue C

Abstract: This paper aims to explore the real effect of mandatory and voluntary environmental, social, and governance (ESG) disclosure on corporate earnings management. We find that mandatory ESG disclosure has a negative effect on firms’ earnings management, while voluntary disclosure has almost no significant impact. We exploit China’s 2008 mandate regulation and construct a difference-in-differences design to show that firms with mandatory ESG disclosure experience an alleviation of information asymmetry through increased transparency of specific accounting items and eventually decrease earnings management. In addition, the negative effect of mandatory ESG disclosure is more pronounced for firms with stronger motivations to manipulate earnings. We also find that the ESG disclosure quality is higher under mandatory disclosure and the environmental, social, and government performance is improved for firms disclosed ESG reports. Our results support the view that mandatory ESG disclosure has informative advantages over voluntary disclosure and improves the quality of financial reporting.

Keywords: ESG reporting; ESG disclosure; Mandatory disclosure; Voluntary disclosure; Earnings management; Financial reporting quality (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0261560625000580
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:154:y:2025:i:c:s0261560625000580

DOI: 10.1016/j.jimonfin.2025.103323

Access Statistics for this article

Journal of International Money and Finance is currently edited by J. R. Lothian

More articles in Journal of International Money and Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

 
Page updated 2025-04-30
Handle: RePEc:eee:jimfin:v:154:y:2025:i:c:s0261560625000580