ESG Performance and Income Smoothing: An Analysis of Companies Belonging to the BRICS

AbstractPurpose – 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.Keywords – ESG, CSR, Income Smoothing, Earnings Quality, BRICS.