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korean management review - Vol. 51 , No. 4
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korean management review - Vol. 51, No. 4, pp. 1005-1047
Abbreviation: kmr
ISSN: 1226-1874 (Print)
Print publication date 31 Aug 2022
Received 02 Jan 2022 Revised 21 Apr 2022 Accepted 10 May 2022
DOI: https://doi.org/10.17287/kmr.2022.51.4.1005

The Impact of ESG on Earnings Management: Some Empirical Evidence
Sang Yi Shin ; Jong-Il Park
(First Auther) Part-time Lecturer, Department of Accounting, Jeonbuk National University (ssyend@naver.com)
(Corresponding Auther) Professor, School of Business, Chungbuk National University (parkjil@chungbuk.ac.kr)

ESG가 이익조정에 미치는 영향에 관한 경험적 증거

Copyright 2011 THE KOREAN ACADEMIC SOCIETY OF BUSINESS ADMINISTRATION
This is an open access article distributed under the terms of the Creative Commons Attribution License 4.0, which permits unrestricted, distribution, and reproduction in any medium, provided the original work is properly cited.
Abstract

In this study, we examine whether a negative relationship between a high degree of ESG(and/or factors) and EM (i.e., AEM, REM) with regard to ① direct effect, ② moderating effect, and ③ combined effect. For this, we base the sample of our study consisted of 6,250 firm-year observations using the evaluation information of KCGS those listed on the Korea Exchange from 2011 to 2020. The empirical result of our study is as follow. First, we find that ESG ratings have a negative influence on REM but not on AEM in respect of direct effect. Second, we do not find that high-grade ESG negatively moderates the positive relation between loss avoidance as well as earnings decrease avoidance (i.e., a strong incentive for managers to report earnings) and EM in respect of moderating effect. Third, we find that firms with higher level of foreign ownership negatively moderate the relation between ESG and EM in respect of combined effect of the interactions between ESG and external corporate governance. In sum, Our findings provide a contribution on the relationship between sustainability engagement and EM practices, extending the prior research focused on moderating effect and combined effect. Thus, we fill the prior research gap.

Keywords: ESG, Accruals-based earnings management, Real Earnings Management, Loss Avoidance, External Corporate governance
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∙ The author Sang Yi Shin is currently a part-time lecturer in department of accounting, Jeonbuk National University. She graduated from the business administration at Daejin University, and received her MS, and Ph. D. degree in business administration from Chungbuk National University. Her main research areas are financial reporting quality, tax risk, audit risk, corporate governance, and ESG.

∙ The author Jong-Il Park is currently a professor in accounting at school of business, Chungbuk National University. He received his undergraduate, MS, and Ph. D. degree in business administration from Hongik University. He is interested in issues of financial reporting quality, book-tax difference, earnings management, overvalued equity, tax avoidance, tax risk, corporate governance, ESG, audit quality, audit hours by rank, and earnings forecast of analyst.

 
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