Corporate biodiversity reporting and earnings management: Does a critical mass of female directors have an impact?

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Abstract

This study addresses the relationship between corporate biodiversity reporting (CBR) and earnings management as well as the moderating impact of board gender diversity (BGD). Due to increased regulatory pressure, we relied on a sample of STOXX Europe 600 firms (1,537 firm-year observations) for the business years 2017–2021. In line with the moral licensing hypothesis, we assume that CBR and our two main proxies of earnings management (accruals-based and real earnings management) are positively related, and a critical mass of female directors may weaken this link. Our regression results align with these assumptions and prior research on similar relationships. Moreover, we conduct several endogeneity checks, which support our main results. This study mainly contributes to prior research as it is the first one on the link between CBR and earnings management. We stress major implications for researchers, standard setters, and business practitioners. Biodiversity represents a key sub-pillar of sustainability reporting with an impact on financial reporting, indicating the need for integrated thinking, which should be promoted in future empirical research.

Keywords: Sustainability Reporting, Earnings Management, Board Gender Diversity, Biodiversity, Corporate Governance

Authors’ individual contribution: The Author is responsible for all the contributions to the paper according to CRediT (Contributor Roles Taxonomy) standards.

Declaration of conflicting interests: The Author declares that there is no conflict of interest.

JEL Classification: G34, M14, M41, Q56, Q57

Received: 04.10.2023
Accepted: 22.01.2024
Published online: 25.01.2024

How to cite this paper: Velte, P. (2024). Corporate biodiversity reporting and earnings management: Does a critical mass of female directors have an impact? Corporate Ownership & Control, 21(1), 8–20. https://doi.org/10.22495/cocv21i1art1