ESG performance and firm misconduct: Evidence from R&D manipulation

•This study documents that better ESG performance effectively curbs firm R&D manipulation behaviors.•The inhibitory effect works through three channels: “information effect”, “governance effect” and the “resource effect”.•ESG plays a complementary role alongside internal control and external con...

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Bibliographic Details
Published in:Economics letters 2024-04, Vol.237, p.111668, Article 111668
Main Author: Chen, Mengtao
Format: Article
Language:English
Subjects:
China
data collection
economics
ESG
governance
Governance effect
Information effect
R&D manipulation
Resource effect
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Summary:•This study documents that better ESG performance effectively curbs firm R&D manipulation behaviors.•The inhibitory effect works through three channels: “information effect”, “governance effect” and the “resource effect”.•ESG plays a complementary role alongside internal control and external control in mitigating R&D manipulation. This study examines the impact of ESG on firm R&D manipulation behaviors by using the panel dataset from 2010 to 2022 in China. The empirical results find that better ESG performance significantly curbs firms' R&D manipulation behavior, and this finding is robust to a set of tests. Mechanism analysis indicates that ESG mitigates R&D manipulation through information effect, governance effect, and resource effect. Expanded analysis shows that ESG plays a complementary role both with internal and external controls in mitigating R&D manipulation.
ISSN:0165-1765
1873-7374
DOI:10.1016/j.econlet.2024.111668