Abstract
This study examines the association of corporate sustainability management with earnings transparency. Based on previous studies that indicate that sustainability management activities reduce earnings management and corporate risk and increase a firmās value, this study predicts that the firms with effective sustainability management will have a high earnings transparency. In addition, this study examines the differential effect of corporate sustainability management on earnings transparency according to whether or not a firm belongs to a chaebol. We use Environmental, Social, and Governance (ESG) ratings of the Korean Corporate Governance Service (KCGS) as a proxy for corporate sustainability management and apply the method of Cheng and Subramanyam (2008) to measure earnings transparency. The empirical results show that there is a significant positive relationship between corporate sustainability management and earnings transparency. Furthermore, the association between corporate sustainability management and earnings transparency is more negative for firms belonging to a chaebol. These results indirectly show that firms belonging to a chaebol have a lower level of information asymmetry than firms not belonging to a chaebol. This study focuses on corporate sustainability management as a determinant of earnings transparency, and is useful for examining the effect of belonging to a chaebol on the relationship between sustainability management and earnings transparency. Our results are expected to provide important implications not only for managers, but also for investors and regulators.
Highlights
Social awareness of sustainability management has increased, and corporate globalization, the emergence of various stakeholders, and climate change have increased interest in corporate sustainability management (CSM)
The positive correlation between corporate sustainability management and earnings transparency is less pronounced in firms belonging to a chaebol. These results indirectly show that firms belonging to a chaebol have a lower information asymmetry level than firms not belong to a chaebol [15]
Corporate Governance Service); CHAEBOLi,t is an indicator variable: If a firm belongs to a chaebol, it takes the value of 1, and 0 otherwise; and CSMĆCHAEBOLi,t is the interest variable, which is the interaction variable between CSMi,t and CHAEBOLi,t
Summary
Social awareness of sustainability management has increased, and corporate globalization, the emergence of various stakeholders, and climate change have increased interest in corporate sustainability management (CSM). Previous research reported that better sustainable management activities result in the reduction of earnings management, information asymmetry, and corporate risk, and the increase of enterprise value. The empirical results show a significant positive relationship between corporate sustainability management and earnings transparency, meaning that a company with effective sustainability management activities has a higher earnings transparency This is in line with previous studies, which found that sustainability management activities reduce earnings management and corporate risk and increase firm value [10,11,12,13,14]. Our study defines earnings transparency based on how earnings information describes the change in economic value of a company from the viewpoint of accounting transparency, and empirically examines the relationship between earnings transparency and sustainability management.
Sign-in/Register to view highlights & summary 
Published Version (
Free)
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
