(The) impact of corporate environmental responsibility on financial reporting quality

Abstract

This paper investigates whether manufacturing firms with a high level of corporate environmental responsibility (CER) exhibit superior financial reporting quality. In particular, I examine whether the degree of earnings management is lower when firms have higher CER. I find that firms with a higher level of CER are less likely to manage earnings through discretionary accruals and real operating activities. This finding is robust to controlling for various factors that are known to affect earnings management, and to addressing endogeneity through an instrumental variable approach.