Are the Quantity and Quality of Sustainability Disclosures Associated with the Innate and Discretionary Earnings Quality?

Zabihollah Rezaee () and Ling Tuo ()
Additional contact information
Zabihollah Rezaee: The University of Memphis
Ling Tuo: Lawrence Technological University

Journal of Business Ethics, 2019, vol. 155, issue 3, No 8, 763-786

Abstract: Abstract Voluntary disclosures of sustainability information have recently received considerable attention by investors, regulators, and public companies in improving reliability and integrity of corporate reporting. We examine the association between the quantity and quality of sustainability disclosures and earnings quality in the context of corporate ethical value and culture. We posit that sustainability disclosures of environmental, social, and governance (ESG) performance reports are linked to earnings quality, because of the importance of both earnings quality and ESG sustainability disclosures to investors and trustworthiness of corporate reporting. We collect our sample of 35,110 firm-year observations between 1999 and 2015. Using both difference-in-difference tests and OLS regression, we find that sustainability disclosure quantity is positively associated with innate earnings quality and negatively correlated with discretionary earnings quality in mitigating managerial earnings manipulation and unethical opportunistic reporting behavior. Further tests illustrate that sustainability disclosure quality can strengthen the positive relation between innate earnings quality and sustainability disclosure quantity and mitigate the negative relation between discretionary earnings quality and sustainability disclosure quantity. Finally, additional tests suggest that the relation between earnings quality and sustainability disclosure quantity is moderated by corporate structure and prior-year sustainability performance. Our results provide policy, practical, and research implications as ESG sustainability reporting is being integrated into corporate culture and business models.

Keywords: Earnings quality; Sustainability disclosure; Unethical and opportunistic earnings management; Sustainability performance; Corporate social responsibility (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (44)

Downloads: (external link)
http://link.springer.com/10.1007/s10551-017-3546-y Abstract (text/html)
Access to full text is restricted to subscribers.

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:kap:jbuset:v:155:y:2019:i:3:d:10.1007_s10551-017-3546-y

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/10551/PS2

DOI: 10.1007/s10551-017-3546-y

Access Statistics for this article

Journal of Business Ethics is currently edited by Michelle Greenwood and R. Edward Freeman

More articles in Journal of Business Ethics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().