The moderating role of CSR in the relationship between earnings management and cost of equity: evidence from European ESG data

Abstract

Purpose

The present work aimed to identify the impact of accrual-based earnings management on the cost of equity (KE) through corporate social responsibility (CSR) as a moderating variable on European Environmental, Social, and Governance (ESG) companies.

Design/methodology/approach

The authors used data from a sample of 366 European firms over the 2012–2022 period. The data were collected from the Thomson Reuters Asset 4 and I/B/E/S database and analyzed using STATA 17 as a statistical software package.

Findings

As expected, the results showed a negative relationship between accruals, CSR and KE. Moreover, they suggest that the moderating variable negatively affects the relationship between accruals and the KE.

Practical implications

The results are pertinent to stakeholders and investors, who would pressure companies to enhance the quality of disclosed information and mitigate risks facing the company.

Originality/value

The main contribution lies in examining the relationship between accruals and KE through CSR in the European ESG context.

Citation

Chouaibi, Y., Zouari-Hadiji, R. and Khlifi, S. (2023), "The moderating role of CSR in the relationship between earnings management and cost of equity: evidence from European ESG data", Asian Review of Accounting, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/ARA-08-2023-0209