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

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  • Ozili, Peterson K

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.

Suggested Citation

  • Ozili, Peterson K, 2023. "Earnings management for sustainability: the surplus income model of sustainable development," MPRA Paper 118803, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:118803
    as

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    File URL: https://mpra.ub.uni-muenchen.de/118803/1/MPRA_paper_118803.pdf
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Earnings management; surplus income model; income smoothing; income targeting; tax rebate; environment; sustainability; sustainable development; accounting; managerial discretion;
    All these keywords.

    JEL classification:

    • M10 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - General
    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation
    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development

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