IDEAS home Printed from https://ideas.repec.org/a/eee/finana/v102y2025ics1057521925002200.html
   My bibliography  Save this article

Earning quality and climate risk: The case of European firms

Author

Listed:
  • Abdesslem, Rim Ben
  • Chkir, Imed
  • Saadi, Samir

Abstract

We investigate the effect of climate risk on two fundamental characteristics of earnings quality: faithful representation and relevance, of 184 European-listed companies over the period of 2010 to 2019. We find that climate risk has a negative impact on both the faithfulness and relevance of earnings, ultimately reducing overall earnings quality. Firms in countries with higher climate risk are more prone to engage in accrual-based earnings management and report less persistent, predictable, and relevant earnings. In addition, we investigate the moderating effect of corporate social responsibility and the Paris agreement on this relationship and find that the negative effect on earning quality is stronger for less socially responsible firms and in the period before the Paris agreement. Our results are robust to alternative measures of climate risk and earnings quality.

Suggested Citation

  • Abdesslem, Rim Ben & Chkir, Imed & Saadi, Samir, 2025. "Earning quality and climate risk: The case of European firms," International Review of Financial Analysis, Elsevier, vol. 102(C).
    • Handle: RePEc:eee:finana:v:102:y:2025:i:c:s1057521925002200
    DOI: 10.1016/j.irfa.2025.104133
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1057521925002200
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.irfa.2025.104133?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    Climate risk; Earnings quality; Corporate social responsibility; Paris agreement;
    All these keywords.

    JEL classification:

    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:finana:v:102:y:2025:i:c:s1057521925002200. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/620166 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.