Climate change mitigation: Carbon assurance and reporting integrity

Concern about climate change has increased the pressure on firms to be accountable for social impact and to report on environmental, social and governance (ESG) performance. Focusing on the view that sustainability‐oriented firms are likely to consider wider stakeholder interests and pursue high fin...

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Bibliographic Details
Published in:Business strategy and the environment 2021-12, Vol.30 (8), p.3839-3853
Main Authors: Bui, Binh, Houqe, Muhammad Nurul, Zaman, Mahbub
Format: Article
Language:English
Subjects:
Assurance
Carbon
carbon assurance
Climate change
Climate change mitigation
Companies
disclosure
Earnings
earnings management
Environmental performance
Financial reporting
Gender
Governance
Integrity
Mitigation
Morality
Profits
reporting quality
Social impact
Stock exchanges
sustainability
Verification
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Summary:Concern about climate change has increased the pressure on firms to be accountable for social impact and to report on environmental, social and governance (ESG) performance. Focusing on the view that sustainability‐oriented firms are likely to consider wider stakeholder interests and pursue high financial reporting integrity, this paper examines the association between carbon assurance and earnings management. Using a sample of firms listed on the New York Stock Exchange, we find voluntary adoption of carbon assurance (level), carbon disclosure and gender diverse boards are negatively associated with earnings management. Additional tests using different components of carbon assurance (percent and verification) confirm our main results. Our results suggest that firms that voluntarily invest in carbon assurance, carbon disclosure and gender diverse boards are less likely to engage in earnings management and thus have higher reporting integrity. This aligns with the view that firms' ethical concerns translate into higher quality reporting.
ISSN:0964-4733
1099-0836
DOI:10.1002/bse.2843