Esg disclosure, earnings management, and financial performance in the pre and post Covid 19 period: Evidence from hose-listed firms

Abstract

This study employs panel-data estimation, using a two-way (firm and year) fixed-effects model with firm-clustered standard errors as the main specification for every equation, and applies pooled OLS, random effects, FGLS, Driscoll–Kraay and two-step system-GMM estimators as robustness and endogeneity checks. The empirical findings indicate that ESG disclosure plays an important role in explaining corporate financial performance, although the magnitude and direction of the relationship vary across different performance measures. Specifically, ESG disclosure shows a positive association with market-based performance (Tobin’s Q), while its effect on accounting-based performance (ROA) appears weaker and less robust across model specifications. In relation to earnings management, the results suggest that ESG disclosure is positively associated with earnings management in some estimations, although this relationship is not fully robust across all models. In addition, earnings management does not show a stable effect on firm performance across alternative estimators. The findings also indicate that the relationships among ESG disclosure, earnings management, and financial performance differ between the pre- and post-COVID-19 periods. More importantly, the results suggest that COVID-19 weakens the positive relationship between ESG disclosure and earnings management, implying that the pandemic altered corporate reporting behavior and the role of sustainability disclosure. Overall, this study provides important implications for policymakers, regulators, corporate managers, and investors by offering a deeper understanding of how ESG disclosure and earnings management are associated with firm performance in an emerging market context such as Vietnam. However, the findings should be interpreted as evidence of association rather than definitive causal relationships