Earnings management for sustainability: the surplus income model of sustainable development

Peterson Ozili

MPRA Paper from University Library of Munich, Germany

Abstract: The purpose of this paper is to develop a new model or approach to earnings management for sustainability. The challenges posed by climate change and environmental degradation have stimulated interest in sustainability. But such interest has not led to the development of new models that demonstrate how earnings management by firms can contribute to sustainability and sustainable development. I show that the surplus income model allows a firm to contribute or donate to a relevant sustainability activity or project out of its surplus income. Under this model, managers have an incentive to generate surplus income from which they can contribute to a relevant sustainability activity or project, thereby making the firm a champion of sustainability.

Keywords: Earnings management; surplus income model; income smoothing; income targeting; tax rebate; environment; sustainability; sustainable development; accounting; managerial discretion (search for similar items in EconPapers)
JEL-codes: M10 M40 M41 M48 Q01 (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-env and nep-ppm
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Related works:
Chapter: Earnings Management for Sustainability: The Surplus Income Model of Sustainable Development (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:118803

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