Is earnings management associated with corporate environmental disclosure?

Ali Meftah Gerged, Lara Mohammad Al-Haddad and Meshari O. Al-Hajri

Accounting Research Journal, 2020, vol. 33, issue 1, 167-185

Abstract: Purpose - This study aims to investigate the association between corporate environmental disclosure (CED) and earnings management (EM) in a Gulf Cooperation Council (GCC) emerging market, namely, Kuwait. Design/methodology/approach - Using panel data from firms listed on the Kuwaiti stock exchange from 2010 to 2014, this paper applies a fixed-effects model to examine the CED-EM nexus. This analysis was supplemented with estimating a two-stage least-squares (2SLS) model and a generalised method of moment model to address any concerns regarding endogeneity problems. Findings - The results are suggestive of a significant and negative relationship between CED and EM in Kuwait. This implies that the environmentally responsible managers are less likely to be engaged in EM practices in Kuwait. Research limitations/implications - The theoretical implication of the results of this study is that managers in Kuwait seem to use CED as a method to decrease the possibility of any formal or informal actions that could be imposed upon their activities. Originality/value - So far, a limited number of studies focused on examining the CED-EM nexus internationally. Furthermore, studies carried out to examine the CED-EM link within a GCC market is virtually non-existent. This study, therefore, presents the first empirical analysis of this relationship in Kuwait. Also, this study is of a significant value stemming from the environmental challenges that are facing Kuwait as an oil-reliant economy coupled together with the crucial economic development in Kuwait and its critical contribution to the GCC economy.

Keywords: Corporate environmental disclosure (CED); Earnings management (EM); Gulf cooperation council (GCC); Kuwait; Panel data (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eme:arjpps:arj-05-2018-0082

DOI: 10.1108/ARJ-05-2018-0082

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