Abstract This study examines the relationship between earnings management/earnings quality and the environmental, social, and governance (ESG) performance in firms listed on the BIST Sustainability Index (Türkiye) and the Dow Jones Sustainability World Index (global). The governance dimension is emphasized, focusing on management, shareholders, and corporate social responsibility (CSR) strategy. The data set covers the BIST sample (29 companies) and the DJSI World sample (231 companies) over the 2018–2022 period. In the first stage, ESG pillars were examined separately; in the second stage, 16 governance subvariables were included instead of the governance. A two-way fixed-effects model with robust estimators was applied to address heteroskedasticity, autocorrelation, and cross-sectional dependence. Findings show that earnings management in Türkiye is mainly driven by management-related governance factors, while at the global level, shareholder engagement and CSR strategies also play a role. The results highlight the critical role of governance in shaping earnings management and suggest that stronger ESG practices enhance reporting quality. For regulatory authorities and policymakers, these findings highlight the need to strengthen board oversight through regulations in emerging markets such as Türkiye in order to enhance market transparency; and, at a global level, to expand and make mandatory legal frameworks that promote stakeholder rights and corporate social responsibility (CSR) strategies.
CIBIR et al. (Sat,) studied this question.