ESG Performance and Income Smoothing: An Analysis of Companies Belonging to the BRICS
DOI:
https://doi.org/10.17524/repec.v20.e3839Keywords:
ESG, Corporate Social Responsibility (CSR)., Income Smoothing, Earnings Quality, BRICSAbstract
Abstract
Purpose – The relationship between environmental, social, and governance (ESG) performance and earnings manegement in emerging markets remains uncertain, and its implications for income smoothing are not well understood. This study examines how ESG performance influences intentional income smoothing among BRICS firms (Brazil, Russia, India, China, and South Africa).
Design – This study employs two measures of intentional income smoothing (overall and accrual-based) and the Refinitiv ESG Score to analyze non-financial firms listed on BRICS stock exchanges. The sample includes 1,071 firms and 5,437 observations over the period from 2016 to 2021. The models were estimated using multiple linear regression with random effects and industry controls.
Findings – The influence of ESG performance on income smoothing varies across BRICS firms. The most consistent effect was observed among Brazilian companies, which exhibited lower levels of intentional income smoothing under both metrics. In India and China, the opposite relationship was observed.
In Russia and South Africa, no effect was identified, suggesting that country-specific institutions shape the relationship between income smoothing mechanisms and ESG within the BRICS, either reinforcing disciplinary incentives or allowing persistent manipulation.
Practical & Social implications – ESG scores appear to convey different information about earnings quality across the BRICS. Stakeholders should interpret ESG signals in a context-sensitive manner when assessing reporting risks in emerging markets.
Translation
This article is a translation in Português (Brasil) of the article:
ESG Performance and Income Smoothing: An Analysis of Companies Belonging to the BRICS
References
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Silva, L. J.; Pereira, J. O., & Carmo, C.H. S. (2022). Value relevance dos relatórios de responsabilidade social corporativa nas empresas da B3. Revista Brasileira de Gestão Ambiental e Sustentabilidade, 9(21), 509-527. https://doi.org/10.21438/rbgas(2022)092133
Sousa, A. M.; Feltes, T.; Meurer, R. M., & Ribeiro, A. M. (2022). Efeito da suavização intencional de resultados na persistência dos lucros das empresas brasileiras de capital aberto. Enfoque: Reflexão Contábil, 41(2), 87-106. https://doi.org/10.4025/enfoque.v41i2.53295
Sousa, A. M.; Ribeiro, A. M.; Vicente, E. F. R., & Carmo, C. H. S. (2020). Suavização de resultados e comparabilidade dos relatórios financeiros: evidências em empresas abertas do mercado brasileiro. Revista de Contabilidade e Organizações, 14, e164488-e164488. https://doi.org/10.11606/issn.1982-6486.rco.2020.164488
Tripathi, V., & Kaur, A. (2020). Socially responsible investing: performance evaluation of BRICS nations. Journal of Advances in Management Research, 17(4), 525-547. https://doi.org/10.1108/JAMR-02-2020-0020
Altoé, S. M. L., Ribeiro, F., & Colauto, R. D. (2015). Tempestividade da informação contábil e prática da suavização de resultados: um estudo no mercado de capitais brasileiro. Revista Mineira de Contabilidade, 16(3), 17-25.
Bajic, S., & Yurtoglu, B. (2018). Which aspects of CSR predict firm market value? Journal of Capital Markets Studies, 2(1), 50-69. https://doi.org/10.1108/jcms-10-2017-0002
Baumann, R. (2017). Os novos bancos de desenvolvimento: independência conflitiva ou parcerias estratégicas? Brazilian Journal of Political Economy, 37, 287–303. https://doi.org/10.1590/0101-31572017v37n02a02
Castro, M. A. R., & Martinez, A. L. (2009). Income smoothing, custo de capital de terceiros e estrutura de capital no Brasil. Revista de Administração Mackenzie, 10(6), 25-46. https://doi.org/10.1590/S1678-69712009000600004
Cavalcanti, R. P. (2018). Desenvolvimento sustentável: uma análise a partir da perspectiva dos BRICS. Revista de la Secretaría del Tribunal Permanente de Revisión, 6(11), 109-133. https://doi.org/10.16890/rstpr.a6.n11.p109
Christina, S., & Alexander, N. (2019). Corporate governance, corporate social responsibility disclosure, and earnings management. In 5º Annual International Conference on Accounting Research, 62-65. https://doi.org/10.2991/aicar-18.2019.14
Eckel, N. (1981). The income-smoothing hypothesis revisited. Abacus, 17(1), 28-40. https://doi.org/10.1111/j.1467-6281.1981.tb00099.x
Gao, L., & Zhang, J. H. (2015). Firms earnings smoothing, corporate social responsibility, and valuation. Journal of Corporate Finance, 32(1), 108-127. https://doi.org/10.1016/j.jcorpfin.2015.03.004
Gebert, I. M., & de Mello-Sampayo, F. (2024). Efficiency of BRICS countries in sustainable development: a comparative data envelopment analysis. International Journal of Development Issues, (ahead-of-print). https://doi.org/10.1108/IJDI-12-2023-0287
Gillan, S. L., Koch, A., & Starks, L. T. (2021). Firms and social responsibility: A review of ESG and CSR research in corporate finance. Journal of Corporate Finance, 66, 101889. http://dx.doi.org/10.1016/j.jcorpfin.2021.101889
Gong, G., Louis, H., & Sun, A. X. (2008). Earnings management and firm performance following open market repurchases. The Journal of Finance, 63(2), 947-986. https://doi.org/10.1111/j.1540-6261.2008.01336.x
Jordaan, L. A., Klerk, M., & de Villiers, C. J. (2018). Corporate social responsibility and earnings management of South African companies. South African Journal of Economic and Management Sciences, 21(1), 1-13. https://doi.org/10.4102/sajems.v21i1.1849
Kim, S. H., Udawatte, P., & Yin, J. (2019). The effects of corporate social responsibility on real and accrual‐based earnings management: Evidence from China. Australian Accounting Review, 29(3), 580-594. https://doi.org/10.1111/auar.12235
Kumar, S. B., Goyal, V., & Mitra, S. K. (2019). The relationship between earnings round up/down and global financial crisis: evidence from BRICS markets. Asia-Pacific Journal of Accounting & Economics, 28(6), 746-769. https://doi.org/10.1080/16081625.2019.1584756
Lang, M., Lins, K. V., & Maffett, M. (2012). Transparency, liquidity, and valuation: International evidence on when transparency matters most. Journal of Accounting Research, 50(3), 729-774. https://doi.org/10.1111/j.1475-679X.2012.00442.x
Leuz, C., Nanda, D., & Wysocki, P. D. (2003). Earnings management and investor protection: an international comparison. Journal of financial economics, 69(3), 505-527. https://doi.org/10.1016/S0304-405X(03)00121-1
Li, T. T., Wang, K., Sueyoshi, T., & Wang, D. D. (2021). ESG: Research Progress and Future Prospects. Sustainability, 13(21), 11663. https://doi.org/10.3390/su132111663
Li, Y., Gong, M., Zhang, X. Y., & Koh, L. (2018). The impact of environmental, social and governance disclosure on firm value: The role of CEO power. The British Accounting Review, 50(1), 60–75. https://doi.org/10.1016/j.bar.2017.09.007
Liao, F., Zhang, R., & Song, J. (2024). Corporate Social Responsibility, Analyst Focus, and Firm Performance. Highlights in Business, Economics and Management, 37, 430-447.
Martinez, A. L. (2006). Minimizando a variabilidade dos resultados contábeis: estudo empírico do income smoothing no Brasil. Revista Universo Contábil, 2(1), 9-25.
Nardi, P. C. C., & Nakao, S. H. (2009). Gerenciamento de resultados e a relação com o custo da dívida das empresas brasileiras abertas. Revista Contabilidade & Finanças, 20, 77-100. https://doi.org/10.1590/S1519-70772009000300006
Oliveira, M. C., Damasceno, F. A. M., de Sousa Amorim, S. M. S., & Gomes, C. A. S. (2020). Análise da Divulgação de Informações Ambientais por Empresas do Setor Elétrico: um Estudo em Empresas dos Países do BRICS. Sociedade, Contabilidade e Gestão, 15(3), 65-83. https://doi.org/10.21446/scg_ufrj.v0i0.16760
Pasko, O., Chen, F., Proskurina, N., Mao, R., Gryn, V., & Pushkar, I. (2021). Are corporate social responsibility active firms less involved in earnings management? Empirical evidence from China. Business: Theory and Practice, 22(2), 504-516. https://doi.org/10.3846/btp.2021.14940
Pedron, A. P. B., Macagnan, C. B., Simon, D. S., & Vancin, D. F. (2020). Environmental disclosure effects on returns and market value. Environment, Development and Sustainability, 23(3), 4614-4633. https://doi.org/10.1007/s10668-020-00790-2
Refinitiv (2022). Pontuações de ESG da empresa da Refinitiv. https://www.refinitiv.com/pt/sustainable-finance/esg-scores
Silva, L. J.; Pereira, J. O., & Carmo, C.H. S. (2022). Value relevance dos relatórios de responsabilidade social corporativa nas empresas da B3. Revista Brasileira de Gestão Ambiental e Sustentabilidade, 9(21), 509-527. https://doi.org/10.21438/rbgas(2022)092133
Sousa, A. M.; Feltes, T.; Meurer, R. M., & Ribeiro, A. M. (2022). Efeito da suavização intencional de resultados na persistência dos lucros das empresas brasileiras de capital aberto. Enfoque: Reflexão Contábil, 41(2), 87-106. https://doi.org/10.4025/enfoque.v41i2.53295
Sousa, A. M.; Ribeiro, A. M.; Vicente, E. F. R., & Carmo, C. H. S. (2020). Suavização de resultados e comparabilidade dos relatórios financeiros: evidências em empresas abertas do mercado brasileiro. Revista de Contabilidade e Organizações, 14, e164488-e164488. https://doi.org/10.11606/issn.1982-6486.rco.2020.164488
Tripathi, V., & Kaur, A. (2020). Socially responsible investing: performance evaluation of BRICS nations. Journal of Advances in Management Research, 17(4), 525-547. https://doi.org/10.1108/JAMR-02-2020-0020
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2026-03-27
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Silva do Carmo, C. H. ., Silva, L. J., Flores, E. da S., & Ribeiro, A. M. (2026). ESG Performance and Income Smoothing: An Analysis of Companies Belonging to the BRICS. Journal of Education and Research in Accounting (REPeC), 20. https://doi.org/10.17524/repec.v20.e3839
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