Earnings Management and Sustainability Reporting Disclosure: Some Insights from Indonesia

Abstract

Earnings manipulation is often associated with deceiving public information that is displayed in sustainability reports. Therefore, the current study aims to explore the nexus between earnings management and sustainability reporting practices in the context of Indonesia. This study employs 408 firm-year observations from listed companies in Indonesia during the 2010–2021 period to test the hypothesis using fixed effect regression analyses with standard error estimates. By examining their sustainability reports and financial statements over a specific period, the authors assess the extent to which earnings management influences sustainability reporting practices. This implies that companies engaging in earnings management practices are more likely to exhibit higher-quality sustainability reporting practices. The results contribute valuable and significant empirical insights into the interplay between earnings management and sustainability reporting specifically within the Indonesian context. Furthermore, this study goes beyond examining the relationship itself and delves into potential factors that may influence this relationship.

Keywords

• earnings management
• sustainability reporting
• governance
• Indonesia