THE IMPACT OF ENVIRONMENTAL AND SOCIAL DISCLOSURE ON EARNINGS PERSISTENCE

Thai Van Ha,Talla M Aldeehani,Amena Sibghatullah,Sang Soo Chae

doi:10.32479/ijeep.10625

Thai Van Ha, Talla M Aldeehani + Show 2 more

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https://doi.org/10.32479/ijeep.10625

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Abstract

This paper investigates the relationship between environmental and social disclosure with earnings persistence as a proxy of earnings quality. This research is based on the secondary data obtained from the final reports of the listed firms of Malaysia. The empirical analysis applied on 136 listed firms of Bursa Malaysia throughout 2011 to 2018 with the observation of 1088. The measure of earnings persistence is derived from the panel data based on the regression of the time series model. The results of our study indicate that environmental and social disclosures are positively correlated with earnings persistence. This means that the more the level of commitment a firm shows with environmental and social responsibility, the more persistent earnings it carries. Moreover, earnings persistence is the proxy of earnings quality, and it is desirable by every investor. Keywords: Environmental Disclosure, Social Disclosure, EarningsJEL Classification: O13DOI: https://doi.org/10.32479/ijeep.10625

Highlights

Earnings persistence is directly related to the earnings quality and it is one of the important features that show the financial standing of the firm
The estimation of social and environmental disclosure (ESD) is derived by the negative coefficient which indicates that they are positively correlated with earnings persistence as previous studies mentioned this approach in their research (Laksmana and Yang, 2009)
With respect to the results obtained in the below table, we conclude the relationship of earnings persistence with environmental and social disclosure is positively significant at 5% level

Summary

Introduction

Earnings persistence is directly related to the earnings quality and it is one of the important features that show the financial standing of the firm. The main factors associated with earnings persistence are firm age, firm size, ownership dispersion, market competition, risk aversion, audit quality, and more. These factors are affected by the monetary motive like, proprietary cost, litigation cost, transaction cost, disclosure cost, and so forth. There are other factors that arise from non-financial aspect such as environmental and social aspects They were omitted from the literature and largely influence the earnings quality of the firm

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