Sustainability disclosure and earnings management

Edited book (chapter)


Velayutham, Eswaran. 2018. "Sustainability disclosure and earnings management." Boubaker, Sabri, Cumming, Douglas and Nguyen, Duc Khuong (ed.) Research Handbook of Finance and Sustainability. Cheltenham, United Kingdom. Edward Elgar Publishing. pp. 532-549
Chapter Title

Sustainability disclosure and earnings management

Book Chapter CategoryEdited book (chapter)
ERA Publisher ID1811
Book TitleResearch Handbook of Finance and Sustainability
Authors
AuthorVelayutham, Eswaran
EditorsBoubaker, Sabri, Cumming, Douglas and Nguyen, Duc Khuong
Page Range532-549
Chapter Number27
Number of Pages18
Year2018
PublisherEdward Elgar Publishing
Place of PublicationCheltenham, United Kingdom
ISBN9781786432629
9781786432636
Digital Object Identifier (DOI)https://doi.org/10.4337/9781786432636.00037
Web Address (URL)https://www.elgaronline.com/view/edcoll/9781786432629/9781786432629.00037.xml
Abstract

This chapter reviews the relationship between sustainability disclosure and earnings management. Sustainability disclosures included in this chapter are environmental, social and governmental (ESG) qualities of firms. There are two competing views of arguments that are discussed in this chapter about the relationships between sustainability disclosures and earnings management, namely, ethical orientation and opportunistic orientation. Ethical orientation predicts that ethical managers believe that socially responsible firms prefer to have long-term relationships with their stakeholders. As a result theses managers provide more value relevant information to the stakeholders to make their decisions correctly. On the other hand, managers disclose a substantial amount of sustainability information as a tool to get support from major stakeholders of firms when they engage in earnings management. Agency, stakeholder, legitimacy and signaling theories are discussed to explain the above relationships. This chapter also presents measures and methods of sustainability disclosure and earnings management. Finally, this chapter ends with addressing potential endogeneity issue, the main conclusion, and direction for further research.

Keywordssustainability disclosure; earnings management
ANZSRC Field of Research 2020350202. Finance
350107. Sustainability accounting and reporting
Byline AffiliationsSchool of Commerce
Institution of OriginUniversity of Southern Queensland
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