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<p>The present study investigates the effect of mandatory environmental, social, and governance (ESG) reporting directives on corporate earnings management (EM). The study also uncovers the moderating effect of board diversity and audit committee characteristics on the ESG-EM nexus. Using sample data from 1173 listed firms from 2011 to 2020, the study operationalizes a staggered difference-in-differences research design. The results reveal that the ESG reporting firms exercise greater EM practices through discretionary and real activities manipulation. The findings support the claim that compulsory ESG reporting encourages managers to engage in opportunistic behaviour. Furthermore, the study also corroborates the negative moderating effect of board structures and audit committee. The results advocate that a greater proportion of independent and women directors together with large, independent, and expert audit committees can control the EM conduct of ESG-disclosing firms. The current findings assist stakeholders and investors in understanding the mandatory ESG reporting and EM nexus and better comprehending the managerial behaviour of using ESG reporting to facilitate their unethical conduct.</p>

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Does statutory ESG disclosure stimulate managerial opportunism? Moderating role of board structures and audit committee in an emerging economy

  • 期刊论文

  • 发表日期：

    2025年6月11日

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  • Rajesh Desai

摘要

The present study investigates the effect of mandatory environmental, social, and governance (ESG) reporting directives on corporate earnings management (EM). The study also uncovers the moderating effect of board diversity and audit committee characteristics on the ESG-EM nexus. Using sample data from 1173 listed firms from 2011 to 2020, the study operationalizes a staggered difference-in-differences research design. The results reveal that the ESG reporting firms exercise greater EM practices through discretionary and real activities manipulation. The findings support the claim that compulsory ESG reporting encourages managers to engage in opportunistic behaviour. Furthermore, the study also corroborates the negative moderating effect of board structures and audit committee. The results advocate that a greater proportion of independent and women directors together with large, independent, and expert audit committees can control the EM conduct of ESG-disclosing firms. The current findings assist stakeholders and investors in understanding the mandatory ESG reporting and EM nexus and better comprehending the managerial behaviour of using ESG reporting to facilitate their unethical conduct.