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Does environmental, social, and governance rating affect firms’ real earnings management

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  • Wu, Keping
  • Kong, Dongmin
  • Yang, Wei

Abstract

We examine whether and how ESG ratings influence real earnings management (REM) in firm in the context of China. We find a significant negative correlation between ESG ratings and REM, suggesting that higher ESG ratings improve corporate governance and transparency, thereby reducing REM. Our findings also reveal that internal control quality, external supervision, analyst attention, and corporate governance enhance the negative impact of ESG ratings on REM. Our findings provide empirical insights for investors and policymakers in emerging markets on enhancing corporate transparency and governance through ESG performance.

Suggested Citation

  • Wu, Keping & Kong, Dongmin & Yang, Wei, 2024. "Does environmental, social, and governance rating affect firms’ real earnings management," Finance Research Letters, Elsevier, vol. 67(PA).
    • Handle: RePEc:eee:finlet:v:67:y:2024:i:pa:s1544612324007943
    DOI: 10.1016/j.frl.2024.105764
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    More about this item

    Keywords

    ESG Rating; Real earnings management; Mechanism;
    All these keywords.

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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