The bidirectional relationship between ESG performance and earnings management: Empirical evidence from Germany

Patrick Velte

doi:10.1108/JGR-01-2019-0001

The bidirectional relationship between ESG performance and earnings management: Empirical evidence from Germany

Publikation: Beiträge in Zeitschriften › Zeitschriftenaufsätze › Forschung › begutachtet

Standard

The bidirectional relationship between ESG performance and earnings management: Empirical evidence from Germany. / Velte, Patrick.
in: Journal of Global Responsibility, Jahrgang 10, Nr. 4, 23.10.2019, S. 322-338.

Publikation: Beiträge in Zeitschriften › Zeitschriftenaufsätze › Forschung › begutachtet

Bibtex

@article{2da5ac23e23c467e86311bc928cea740,

title = "The bidirectional relationship between ESG performance and earnings management: Empirical evidence from Germany",

abstract = "Purpose: This study aims to focus on environmental, social and governance (ESG) performance as a whole and individually in its three pillars and their influence on earnings management. Design/methodology/approach: Companies listed on the German Prime Standard (DAX30, TecDAX and MDAX) for the business years 2011-2017 (548 firm-year observations) are included in the empirical quantitative study. A correlation and regression analysis is conducted to analyze the impact of ESG performance as determined by the Asset4 database of Thomson Reuters on accruals-based earnings management (AEM) and real earnings management (REM). Findings: ESG performance has a negative influence on AEM but not on REM. Moreover, by dividing the three different factors of ESG performance, governance performance has the strongest negative impact on AEM in comparison to environmental and social performance. This study also suggests a bidirectional relationship between ESG performance and earnings management. Originality/value: The analysis makes a key contribution to research as the link between ESG performance and their three components and earnings management are analyzed for the German two-tier system for the first time. Corporate practice, regulators and researchers should recognize that ESG performance and financial reporting should be discussed together.",

keywords = "Management studies, financial reporting, ESG performance, earnings management, Corporate governance, Stakeholder theory, Accruals",

author = "Patrick Velte",

year = "2019",

month = oct,

day = "23",

doi = "10.1108/JGR-01-2019-0001",

language = "English",

volume = "10",

pages = "322--338",

journal = "Journal of Global Responsibility",

issn = "2041-2568",

publisher = "Emerald Publishing Limited",

number = "4",

}

RIS

TY - JOUR

T1 - The bidirectional relationship between ESG performance and earnings management

T2 - Empirical evidence from Germany

AU - Velte, Patrick

PY - 2019/10/23

Y1 - 2019/10/23

N2 - Purpose: This study aims to focus on environmental, social and governance (ESG) performance as a whole and individually in its three pillars and their influence on earnings management. Design/methodology/approach: Companies listed on the German Prime Standard (DAX30, TecDAX and MDAX) for the business years 2011-2017 (548 firm-year observations) are included in the empirical quantitative study. A correlation and regression analysis is conducted to analyze the impact of ESG performance as determined by the Asset4 database of Thomson Reuters on accruals-based earnings management (AEM) and real earnings management (REM). Findings: ESG performance has a negative influence on AEM but not on REM. Moreover, by dividing the three different factors of ESG performance, governance performance has the strongest negative impact on AEM in comparison to environmental and social performance. This study also suggests a bidirectional relationship between ESG performance and earnings management. Originality/value: The analysis makes a key contribution to research as the link between ESG performance and their three components and earnings management are analyzed for the German two-tier system for the first time. Corporate practice, regulators and researchers should recognize that ESG performance and financial reporting should be discussed together.

AB - Purpose: This study aims to focus on environmental, social and governance (ESG) performance as a whole and individually in its three pillars and their influence on earnings management. Design/methodology/approach: Companies listed on the German Prime Standard (DAX30, TecDAX and MDAX) for the business years 2011-2017 (548 firm-year observations) are included in the empirical quantitative study. A correlation and regression analysis is conducted to analyze the impact of ESG performance as determined by the Asset4 database of Thomson Reuters on accruals-based earnings management (AEM) and real earnings management (REM). Findings: ESG performance has a negative influence on AEM but not on REM. Moreover, by dividing the three different factors of ESG performance, governance performance has the strongest negative impact on AEM in comparison to environmental and social performance. This study also suggests a bidirectional relationship between ESG performance and earnings management. Originality/value: The analysis makes a key contribution to research as the link between ESG performance and their three components and earnings management are analyzed for the German two-tier system for the first time. Corporate practice, regulators and researchers should recognize that ESG performance and financial reporting should be discussed together.

KW - Management studies

KW - financial reporting

KW - ESG performance

KW - earnings management

KW - Corporate governance

KW - Stakeholder theory

KW - Accruals

UR - http://www.scopus.com/inward/record.url?scp=85083633105&partnerID=8YFLogxK

U2 - 10.1108/JGR-01-2019-0001

DO - 10.1108/JGR-01-2019-0001

M3 - Journal articles

VL - 10

SP - 322

EP - 338

JO - Journal of Global Responsibility

JF - Journal of Global Responsibility

SN - 2041-2568

IS - 4

ER -