Synergistic Shield Or Opportunistic Smokescreen? Esg Performance, Accounting Conservatism,And Accrual-Based Earnings Management

Setiawan, Yan Christianto and Rudiawarni, Felizia Arni and Sulistiawan, Dedhy (2026) Synergistic Shield Or Opportunistic Smokescreen? Esg Performance, Accounting Conservatism,And Accrual-Based Earnings Management. JURNAL BISNIS DAN AKUNTANSI, 28 (1). pp. 111-132. ISSN 2656 – 9124

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Abstract

The link between corporate sustainability and financial reporting quality remains conceptually controversial, especially in emerging markets. This research analyzes the impact of environmental, social, and governance (ESG) performance on future accrual-based earnings management, alongside the moderating role of accounting conservatism in the Indonesian capital market from 2019 to 2024. Fixed-effects panel regressions demonstrate that greater ESG performance significantly reduces opportunistic earnings management. Importantly, conditional conservatism creates a synergistic monitoring environment that complements these sustainability measures. By contrast, unconditional conservatism produces a detrimental substitution effect by generating opaque accounting slack, enabling managers to weaponize their sustainable reputation to conceal financial manipulation. Robustness tests using directional sub-samples reveal that this governance ecosystem operates asymmetrically. ESG and conditional conservatism effectively mitigate artificial earnings inflation, whereas unconditional conservatism actively facilitates opportunistic downward manipulation. Furthermore, additional analyses deconstructing the ESG pillars demonstrate that substantive environmental and social initiatives drive this ethical discipline, while formal governance compliance serves primarily as a symbolic practice. Crucially, unconditional conservatism perverts this dynamic, enabling managers to exploit symbolic governance and weaponize substantive environmental initiatives as a smokescreen for earnings manipulation. Thus, investors and regulators should simultaneously assess sustainability metrics and unconditional conservatism to prevent managerial wealth expropriation.

Item Type:	Article
Uncontrolled Keywords:	Accrual-Based Earnings Management, Conditional Conservatism, ESG Performance, Unconditional Conservatism
Subjects:	H Social Sciences > HF Commerce > HF5601 Accounting
Divisions:	Faculty of Business and Economic > Department of Accounting
Depositing User:	YAN CHRISTIANTO SETIAWAN
Date Deposited:	08 Oct 2026 08:22
Last Modified:	12 Oct 2026 05:14
URI:	http://repository.ubaya.ac.id/id/eprint/51353

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