Exploring ESG practices in relation to accrual earnings management: Corporate competitiveness in crisis period
Camelia Iuliana Lungu, Chirata Caraiani, Cornelia Dascalu, Florentin Caloian
Keywords:
ESG practices, accrual earnings management, competitiveness, crisis period, European companies
Abstract:
This research investigates the relationship between environmental, social, and governance (ESG) practices and accrual earnings management (AEM), with a focus on the moderating influence of the pandemic crisis, from a corporate competitiveness perspective. Aiming to address gaps in the existing literature, this study emphasizes the specifics of European setting, shaped by continuously evolving sustainability requirements. The analysis covers both pre-pandemic and pandemic periods, excluding the influence of the ongoing geopolitical conflicts. Two models for estimating discretionary accruals are applied to differentiate between companies oriented toward performance or growth. The study employs multiple econometric models tested on a sample of non-financial European companies over the 2015-2021 period. Fixed-effects panel regression is used, complemented by endogeneity tests to ensure the robustness of the results. Mixed impacts are revealed in terms of intensity and magnitude of ESG practices (overall and disaggregated) on absolute, income-increasing, and income-decreasing discretionary accruals. Findings indicate that ESG practices, particularly the three individual pillars, have a stronger influence on AEM during the pandemic period. Additional analysis on the institutional context showcases significant differences in both ESG practices and AEM, highlighting the importance of country-level institutional heterogeneity (common versus civil law systems) as a determinant factor to be considered in shaping corporate strategies aimed at competitiveness. The study emphasizes the contingent nature of ESG-AEM relationship, showing a positive association for performance-oriented companies and a negative one for growth-oriented companies. Moreover, ethical or opportunistic management behavior aimed at enhancing competitiveness, may be driven by varying sustainability-related incentives. The results offer practical implications for managers of European companies by illustrating diverse corporate behavior in relation to AEM, with details on the distinct effects of individual ESG pillars delineated before and during the pandemics. Furthermore, this research holds relevance for policymakers by contributing to the discourse on evolving European sustainability disclosure requirements. This responds to the objectives of both stakeholders and corporate leadership. Particular impact is emphasized by showcasing the exposure to vulnerabilities that companies face during challenging periods, such as the pandemic crisis.
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 Exploring ESG practices in relation to accrual earnings management: Corporate competitiveness in crisis period [PDF file] [Filesize: 1.9 MB]
 10.7441/joc.2026.SI.07
Lungu, C. I., Caraiani, C., Dascalu, C., & Caloian, F. (2026). Exploring ESG practices in relation to accrual earnings management: Corporate competitiveness in crisis period. Journal of Competitiveness, 18(SI), 166–218. https://doi.org/10.7441/joc.2026.SI.07
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