ABSTRACT The study investigates the undocumented connection between ESG reporting and banks' earnings management. Moreover, the study examines the unexplored role of investor protection and economic development in moderating the nexus between ESG reporting and bank earnings management. The sample consists of 376 listed banks from 19 countries over the 2009–2022 period. The results indicate that ESG reporting is negatively associated with bank earnings management. Precisely, the negative association is driven by environmental and governance reporting. Furthermore, investor protection and economic development positively moderate the nexus between ESG reporting and earnings management. The study further unveils the heterogeneous impacts of the Paris Agreement and COVID‐19 in shaping the association. The results survive several robustness checks, including alternate estimators, different measures of earnings quality and ESG reporting, sub‐sample analysis, and selection concerns. The findings have substantial implications for all stakeholders, emphasizing the critical role of sustainability reporting in strengthening banks' financial reporting integrity.
Mayank Gupta (Wed,) studied this question.