The impact of ESG performance on earnings management in Malaysia – the moderating role of board gender diversity

This study investigates the impact of environmental, social, and governance performance (ESGP) on earnings management (EM) in Malaysia’s emerging market. Additionally, it examines the moderating role of board gender diversity (BGD) in the relationship between ESGP and EM. The analysis is based on balanced panel data comprising 540 firm-year observations from 135 non-financial listed firms between 2019 and 2022. Hierarchical panel regression analysis was employed to explore both the direct and moderating effects. The results reveal that ESGP is positively and significantly associated with AEM, while it does not exhibit a significant direct effect on REM. Furthermore, BGD plays a significant moderating role in the ESGP–EM relationship. Specifically, BGD strengthens the positive association between ESGP and AEM, while altering the relationship between ESGP and REM. These findings highlight the complex interaction between sustainability performance, corporate governance mechanisms, and financial reporting behaviour. The study underscores the importance of regulatory oversight in enhancing transparency and accountability and calls for policymakers to integrate ESG considerations and governance mechanisms more effectively into corporate reporting frameworks.