The aim of this study is to determine the impact of COVID-19 pandemic on earnings management practices. Focusing on a sample of 2,031 firms listed in 15 European countries, the study uses three discretionary accrual metrics as a proxy for earnings management ( Dechow et al., 1995 ; Kothari et al., 2005 ; McNichols, 2002 ) models. To this end, ordinary least squares (OLS) regressions are applied to compare earnings management during the pre-pandemic period (2017q1–2019q4) and the pandemic period (2020q1–2020q4). The results indicate that the sample firms tend to manage earnings during the pandemic period than during the preceding period. This finding implies a reduced reliability of the financial reports during the COVID-19 pandemic. Further analysis provides evidence of significant income-increasing earnings management during 2020. This finding suggests that firms manage earnings upward by alleviating the level of reported losses to rebuild investor and stakeholder confidence needed to support the economic recovery.

Purpose: This paper aims to determine whether financial performance is affected in firms adopting separately or jointly two sustainability tools (green innovation and environmental, social and governance reporting (ESG)).Design/methodology/approach: The empirical study examines a sample of 211 S&P 500 firms over the 2011 to 2019 period and uses the quantile estimation method.Findings: The results show that two dimensions of ESG disclosure (the social and governance dimensions) and green innovation positively affect financial performance. This result suggests that sustainability tools have a strong financial impact. The positive relationship between green innovation and financial performance is detected at the 10th quantile up to the 70th quantile. This finding suggests that financial performance needs a moderate investment in green innovation. When considering the joint effect of ESG disclosure and green innovation, our findings show that the positive impact of some ESG disclosure dimensions (social and governance) on financial performance is more observable with a moderate investment in green innovation.Originality/value: This study highlights the prominent role of sustainability tools in financial performance. Despite the contributions of the literature, to our knowledge, the relationship between these tools and financial performance is not yet comprehensively investigated. Sustainability is less studied from the social movement perspective. This paper is among the few to study the effect of ESG reporting on financial performance in a world of green innovation.

In recent years, the CSR disclosure–firm risk relationship has raised the acute interest of capital providers, regulators, debtholders, and academic researchers. In addition to the mounting corporate social responsibility (CSR) disclosure issues, one particular area that has increasingly attracted the attention of academics, practitioners, and policymakers is the dynamic of CSR disclosure. The effects of institutional pressures and the relative nature of reputation have amplified expectations over time, resulting in a dynamic CSR disclosure strategy to meet those expectations. However, studies on the relationship between CSR disclosure and firm risk over time are still in their premature stages. Thus, this paper seeks to contribute to the literature on firm risk and CSR disclosure by examining the effect of ESG disclosure on the cost of capital over time. The study examines a sample of 430 S&P 500 US firms observed over the 2011 to 2019 period. Our results indicate that the three dimensions do not have the same effect. Governance disclosure decreases the cost of capital during the first years, and in later years, the effect becomes positive. Over time, social disclosure increases the cost of capital. However, environmental disclosure shows a negative and significant effect on the cost of capital during the first years but no significant effect later in time. Our results contribute to explaining the dynamic effect of CSR disclosure. A predominant feature to consider is the evolution of CSR disclosure over time. Steadily, US firms are moving away from some CSR disclosure activities to others. However, firms that abandoned some existing CSR disclosure commitments may face aggressive responses from stakeholders. US firms have to be more cautious when linking CSR disclosure to firm risk over time, recognizing the long-term benefits and drawbacks of CSR disclosure.