Environmental, social and governance (ESG) performance and earnings management: the role of gender diversity

Vincentia Anindha Primacintya and Indra Wijaya Kusuma

Asian Journal of Accounting Research, 2025, vol. 10, issue 3, 294-314

Abstract: Purpose - This study investigates the impact of ESG performance on earnings management practices in Indonesia and also examines whether gender diversity on the board of commissioners moderates this relationship. Design/methodology/approach - The sample of this study consisted of nonfinancial companies listed on the Indonesia Stock Exchange from 2014 to 2022. ESG performance is proxied by the ESG score; earnings management is calculated by the Jones modified model. Gender diversity is represented by the proportion of female board commissioners. This research employs a balanced panel; after conducting model tests, the common effect model is used to test the first hypothesis, and the fixed effect model is applied to test the second hypothesis. Findings - This study provides empirical evidence that higher ESG performance in a company is associated with lower earnings management. Companies with a diverse gender composition on their board of commissioners demonstrate a stronger negative relationship between ESG performance and earnings management. Research limitations/implications - Empirical evidence on company ESG performance is important because Indonesia, as a G20 member, is striving to maximize the implementation of the SDGs. This study provides empirical evidence on the significance of Goal 5 of the SDGs, which pertains to gender equality in Indonesia. Originality/value - This study complements previous research on ESG in Indonesia by providing empirical evidence on the impact of strong ESG performance among companies. Referring to Indonesia’s two-tier board system and Goal 5 of the SDGs, which focuses on gender equality, this study examines the value of gender diversity on the board of commissioners.

Keywords: Earnings management; SDG 5; ESG; Gender diversity; Female board of commissioners (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eme:ajarpp:ajar-12-2023-0414

DOI: 10.1108/AJAR-12-2023-0414

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