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Corporate environmental disclosure, corporate governance and earnings management

Nan Sun (Durham University, Durham, UK)
Aly Salama (Durham University, Durham, UK)
Khaled Hussainey (Accounting and Finance Division, Stirling Management School, Stirling University, Stirling, UK)
Murya Habbash (Durham University, Durham, UK)

Managerial Auditing Journal

ISSN: 0268-6902

Article publication date: 27 July 2010




The purpose of this paper is to examine the association between corporate environmental disclosure (CED) and earnings management (EM) and the impact of corporate governance (CG) mechanisms on that association.


The paper uses performance‐matched discretionary accruals (DA) as a measure of EM. The paper also uses ordinary least square regression with robust standard errors to examine the association between CED and EM for a sample of 245 UK non‐financial firms for the financial year ended on March 2007. Three different theoretical frameworks are used to identify the expected association between CER and EM. These include: signalling, agency and stakeholder‐legitimacy theories.


The paper finds no significant statistical association between various measures of DA and environmental disclosure. The paper also finds that some CG attributes affect the relationship between CER and EM.

Practical implications

The result suggests that UK corporate managers are not using environmental disclosure as a technique to reduce the probability that public policy actions will be taken against their companies.


Since most empirical research is limited to the US setting, this paper provides a novel contribution to the existing literature, as one of the first to examine this issue in the UK.



Sun, N., Salama, A., Hussainey, K. and Habbash, M. (2010), "Corporate environmental disclosure, corporate governance and earnings management", Managerial Auditing Journal, Vol. 25 No. 7, pp. 679-700.



Emerald Group Publishing Limited

Copyright © 2010, Emerald Group Publishing Limited

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