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IFRS 16 meets ESG: Lease accounting and sustainability

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  • Sharma, Akhil
  • Bansal, Manish
  • Ali, Asgar

Abstract

This study examines the impact of IFRS 16 lease accounting on corporate ESG scores. Using a difference-in-differences approach on BSE-listed companies, we find that lease-intensive firms experienced a significant improvement in ESG scores following the adoption of IFRS 16. The effect is notably stronger in high-growth firms, suggesting that market dynamics amplify the response to accounting change. To validate our findings, we employ entropy balancing to address potential endogeneity and confirm the robustness of the results. This research contributes to the literature by highlighting how specific accounting reforms can drive sustainability outcomes, particularly in emerging markets, and offers practical implications for investors, regulators, and firms navigating the evolving ESG landscape.

Suggested Citation

  • Sharma, Akhil & Bansal, Manish & Ali, Asgar, 2025. "IFRS 16 meets ESG: Lease accounting and sustainability," Finance Research Letters, Elsevier, vol. 86(PD).
    • Handle: RePEc:eee:finlet:v:86:y:2025:i:pd:s1544612325019543
    DOI: 10.1016/j.frl.2025.108700
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