Environmental, social, and governance scores and earnings management in telecommunication companies: An international perspective

Abstract

This study investigates the relationship between environmental, social, and governance (ESG) scores and potential tendencies to manipulate the earnings of telecommunication companies. We assumed a negative relationship between ESG scores and earnings management since the companies with higher ESG are more responsible and expected to prevent manipulation. We used ESG scores from Refinitiv as sustainability measures and discretionary accruals as the indicator of earnings management. We constructed models assuming a bilateral relationship between ESG and earnings. The results reveal that companies with higher environmental scores have higher dispersion from normal accruals; this may result for two reasons in our anticipation: they may record more accruals depending on environmental regulations and may use environmental scores to make up their earnings. Social and governance scores have a negative impact on discretionary accruals, which are insignificant. Hence companies with higher social responsiveness and strong governance produce reliable financial information.

Expectations of manufacturing companies towards suppliers in terms of implementing improvement activities

“…(Increasingly, suppliers are obliged to reduce the negative impact of products and processes on the environment (de Sousa Jabbour, Jabbour, Latan, Teixeira, & de Oliveira, 2014). Most often, customers' expectations towards suppliers refer to reducing the negative impact on the environment of such environmental aspects as consumption of materials (Acar & Coskun, 2023), use of heavy metals such as lead, mercury or cadmium in the processes, gas emissions, in particular, carbon dioxide (Giuniperoa, Hookerb, & Denslow, 2012;Hajmohammad, Vachon, Klassen, & Gavronski, 2013). Suppliers are also expected to recycle production waste (Tseng, Lin, & Chiu, 2009), use renewable energy sources, implement electronic communication, raise employees' awareness, introduce environmental programs such as Responsible Care or Cleaner Production (Jum'a, 2023).…”