Do environmentally sensitive companies engage in lesser earnings management behaviour? evidence from Malaysia

ABSTRACT

Past studies have examined the influence of environmental information on earnings management practices. However, these studies have reported mixed findings and failed to establish a conclusive conclusion. Therefore, rather than re-examining the relationship between environmental disclosure and earnings management, this research offers a new perspective on earnings management based on a company’s sector, specifically, environmentally sensitive (ES) and environmentally non-sensitive (EN) sectors. This study analysed ten years of data (2008–2017) on Malaysian public listed companies. It was found that ES sectors are more likely to be involved in earnings management than EN sectors. This study’s findings could initiate policy revisions leading to sustainable, ethical and responsible financial reporting practices in the future.

KEYWORDS:

• Earnings management
• Earnings manipulation
• Environmentally sensitive sectors

Acknowledgement

The authors would like to thank Dr. Ramzah Dambul and Dr. Janifal Alipal for their early feedback before the paper was submitted. The authors would also like to thank Dr. Olaf Weber and anonymous referees for their feedback on the paper's presentation and content. The authors wish to thank Universiti Malaysia Sarawak for financial assistance in the preparation of this publication.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Correction Statement

This article has been corrected with minor changes. These changes do not impact the academic content of the article.

Additional information

Funding

This work was supported by Universiti Malaysia Sarawak .