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Environmental, social, and governance scores and earnings management in telecommunication companies: An international perspective

Author

Listed:
  • Acar Goksel

    (Independent Researcher, France)

  • Coskun Ali

    (College of Business Administration, American University of the Middle East, Kuwait)

Abstract

This study investigates the relationship between environmental, social, and governance (ESG) scores and potential tendencies to manipulate the earnings of telecommunication companies. We assumed a negative relationship between ESG scores and earnings management since the companies with higher ESG are more responsible and expected to prevent manipulation. We used ESG scores from Refinitiv as sustainability measures and discretionary accruals as the indicator of earnings management. We constructed models assuming a bilateral relationship between ESG and earnings. The results reveal that companies with higher environmental scores have higher dispersion from normal accruals; this may result for two reasons in our anticipation: they may record more accruals depending on environmental regulations and may use environmental scores to make up their earnings. Social and governance scores have a negative impact on discretionary accruals, which are insignificant. Hence companies with higher social responsiveness and strong governance produce reliable financial information.

Suggested Citation

  • Acar Goksel & Coskun Ali, 2023. "Environmental, social, and governance scores and earnings management in telecommunication companies: An international perspective," Financial Internet Quarterly (formerly e-Finanse), Sciendo, vol. 19(2), pages 26-35, June.
    • Handle: RePEc:vrs:finiqu:v:19:y:2023:i:2:p:26-35:n:5
    DOI: 10.2478/fiqf-2023-0010
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    More about this item

    Keywords

    discretionary accruals; disclosures; earnings quality; ESG; telecommunication; sustainability;
    All these keywords.

    JEL classification:

    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts
    • F63 - International Economics - - Economic Impacts of Globalization - - - Economic Development
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • K32 - Law and Economics - - Other Substantive Areas of Law - - - Energy, Environmental, Health, and Safety Law
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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