When transparency meets attention: environmental disclosure mandates, earnings management, and social media

Mandatory environmental disclosure aims to enhance corporate accountability through transparency, yet its effects on financial reporting quality remain poorly understood. We examine whether disclosure mandates systematically shift earnings management toward income inflation. Exploiting China’s staggered designation of Key Pollutant-Discharging Units (2010–2023), we document that mandatory disclosure significantly increases income-inflating discretionary accruals, with effects strengthening over time. Moreover, we document pronounced heterogeneity: the disclosure mandate induces substantially larger income-inflating accrual adjustments among firms facing high social media attention compared with low-attention firms. These findings indicate that digital visibility constitutes an important boundary condition for the financial-reporting consequences of disclosure mandates, with implications for regulatory design in contemporary information environments.