IDEAS home Printed from https://ideas.repec.org/a/wly/buseth/v35y2026i3p2075-2099.html

Impact of Ownership Structures on ESG Performance and Earnings Management: Evidence From India

Author

Listed:
  • Renu Devi
  • Mohammad Firoz

Abstract

This study examines how different ownership structures (Indian ownership and institutional ownership) moderate the relationship between Environmental, Social, and Governance (ESG) performance and earnings management. Additionally, it investigates the distinct roles of Indian family and non‐family ownership in influencing this relationship. Using a sample of 224 non‐financial firms listed on the Nifty 500 index from 2013 to 2023, the study employs a two‐way fixed‐effects model to account for unobserved heterogeneity. To ensure robust results, additional robustness checks, including dynamic panel estimation techniques, are used to address concerns related to measurement error, reverse causality, and endogeneity. The findings align with the active monitoring hypothesis, revealing that Indian ownership plays a pivotal role in discouraging unethical financial reporting, as stronger sustainability performance is significantly associated with lower levels of earnings manipulation. However, the presence of institutional investors does not show a meaningful influence in moderating this relationship. These insights contribute to the growing discourse on responsible ownership and ethical corporate governance in emerging markets. By highlighting the unique governance dynamics in India, this study offers new perspectives on how ownership structures can support the institutionalization of sustainability standards and promote corporate accountability.

Suggested Citation

  • Renu Devi & Mohammad Firoz, 2026. "Impact of Ownership Structures on ESG Performance and Earnings Management: Evidence From India," Business Ethics, the Environment & Responsibility, John Wiley & Sons, Ltd., vol. 35(3), pages 2075-2099, July.
    • Handle: RePEc:wly:buseth:v:35:y:2026:i:3:p:2075-2099
    DOI: 10.1111/beer.70027
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/beer.70027
    Download Restriction: no
    File URL: https://libkey.io/10.1111/beer.70027?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
    ---><---

    References listed on IDEAS

    as
    1. Jinchi Liu & Xiong Xiong & Ya Gao & Jin Zhang, 2023. "The impact of institutional investors on ESG: Evidence from China," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(S2), pages 2801-2826, June.
    2. Robert G. Eccles & Mirtha D. Kastrapeli & Stephanie J. Potter, 2017. "How to Integrate ESG into Investment Decision†Making: Results of a Global Survey of Institutional Investors," Journal of Applied Corporate Finance, Morgan Stanley, vol. 29(4), pages 125-133, December.
    3. Amery Wu & Bruno Zumbo, 2008. "Understanding and Using Mediators and Moderators," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 87(3), pages 367-392, July.
    4. Ali Meftah Gerged & Khaldoon Albitar & Lara Al‐Haddad, 2023. "Corporate environmental disclosure and earnings management—The moderating role of corporate governance structures," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(3), pages 2789-2810, July.
    5. Tarun Khanna & Krishna Palepu, 2000. "Is Group Affiliation Profitable in Emerging Markets? An Analysis of Diversified Indian Business Groups," Journal of Finance, American Finance Association, vol. 55(2), pages 867-891, April.
    6. Mohammed Benlemlih & Mohammad Bitar, 2018. "Corporate Social Responsibility and Investment Efficiency," Post-Print halshs-01321227, HAL.
    7. Charl de Villiers & Ruth Dimes & Matteo La Torre & Matteo Molinari, 2024. "The International Sustainability Standards Board’s (ISSB) past, present, and future: critical reflections and a research agenda," Pacific Accounting Review, Emerald Group Publishing Limited, vol. 36(2), pages 255-273, May.
    8. Preeti Sharma & Priyanka Panday & R. C. Dangwal, 2020. "Determinants of environmental, social and corporate governance (ESG) disclosure: a study of Indian companies," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 17(4), pages 208-217, December.
    9. Supriti Mishra & Damodar Suar, 2010. "Does Corporate Social Responsibility Influence Firm Performance of Indian Companies?," Journal of Business Ethics, Springer, vol. 95(4), pages 571-601, September.
    10. Yamina Chouaibi & Rim Zouari-Hadiji & Sawssen Khlifi, 2023. "The moderating role of CSR in the relationship between earnings management and cost of equity: evidence from European ESG data," Asian Review of Accounting, Emerald Group Publishing Limited, vol. 32(5), pages 693-708, December.
    11. Nemiraja Jadiyappa & Bhavik Parikh & Namrata Saikia & Adam Usman, 2021. "Social responsibility or smoke screening: evidence from India," Sustainability Accounting, Management and Policy Journal, Emerald Group Publishing Limited, vol. 12(4), pages 767-787, June.
    12. Xiao, Xiang & Ge, Ge & Yu, Ziqin, 2024. "Inhibition or inducement: ESG rating changes and earnings management – Based on the perspective of external supervision," Finance Research Letters, Elsevier, vol. 64(C).
    13. Nemiraja Jadiyappa & Bhavik Parikh & Namrata Saikia & Adam Usman, 2021. "Social responsibility or smoke screening: evidence from India," Sustainability Accounting, Management and Policy Journal, Emerald Group Publishing Limited, vol. 12(4), pages 767-787, June.
    14. Raden Roro Widya Ningtyas Soeprajitno & Ainun Na’im & Indra Wijaya Kusuma & Fuad Rakhman, 2024. "Sustainability performance and earnings management: institutional and regulatory perspectives," Cogent Business & Management, Taylor & Francis Journals, vol. 11(1), pages 2381663-238, December.
    15. repec:eme:maj000:maj-02-2014-0997 is not listed on IDEAS
    16. Mohammad Badrul Muttakin & Arifur Khan & Mohammad I Azim, 2015. "Corporate social responsibility disclosures and earnings quality," Managerial Auditing Journal, Emerald Group Publishing Limited, vol. 30(3), pages 277-298, March.
    17. Manish Bansal & Vivek Kumar, 2021. "Forcing responsibility? Examining earnings management induced by mandatory corporate social responsibility: evidence from India," Review of Accounting and Finance, Emerald Group Publishing Limited, vol. 20(2), pages 194-216, August.
    18. Manish Bansal & Vivek Kumar, 2021. "Forcing responsibility? Examining earnings management induced by mandatory corporate social responsibility: evidence from India," Review of Accounting and Finance, Emerald Group Publishing Limited, vol. 20(2), pages 194-216, August.
    19. Hickman, L. Emily & Iyer, Subramanian Rama & Jadiyappa, Nemiraja, 2021. "The effect of voluntary and mandatory corporate social responsibility on earnings management: Evidence from India and the 2% rule," Emerging Markets Review, Elsevier, vol. 46(C).
    20. Jennifer Martínez-Ferrero & Shantanu Banerjee & Isabel María García-Sánchez, 2016. "Corporate Social Responsibility as a Strategic Shield Against Costs of Earnings Management Practices," Journal of Business Ethics, Springer, vol. 133(2), pages 305-324, January.
    21. Mohammad Badrul Muttakin & Arifur Khan & Mohammad I Azim, 2015. "Corporate social responsibility disclosures and earnings quality: Are they a reflection of managers’ opportunistic behavior?," Managerial Auditing Journal, Emerald Group Publishing, vol. 30(3), pages 277-298, March.
    22. Alpaslan Yasar & Neriman Yalçın, 2023. "Voluntary disclosure of scope 3 greenhouse gas emissions and earnings management: Evidence from UK companies," Cogent Business & Management, Taylor & Francis Journals, vol. 10(3), pages 2275849-227, December.
    23. Qian Long Kweh & Hanh Thi My Le & Irene Wei Kiong Ting & Wen-Min Lu, 2023. "Family control, R&D expenses and firm efficiency: evidence from Taiwanese cultural and creative industries," International Journal of Emerging Markets, Emerald Group Publishing Limited, vol. 20(1), pages 278-298, April.
    24. Chada, Swechha, 2023. "Economic policy uncertainties and institutional ownership in India," The Journal of Economic Asymmetries, Elsevier, vol. 27(C).
    25. Eko Suyono & Omar Al Farooque, 2018. "Do governance mechanisms deter earnings management and promote corporate social responsibility?," Accounting Research Journal, Emerald Group Publishing Limited, vol. 31(3), pages 479-495, September.
    26. Iannotta, Giuliano & Nocera, Giacomo & Sironi, Andrea, 2007. "Ownership structure, risk and performance in the European banking industry," Journal of Banking & Finance, Elsevier, vol. 31(7), pages 2127-2149, July.
    27. Peter Nderitu Githaiga, 2023. "Board gender diversity, institutional ownership and earnings management: evidence from East African community listed firms," Journal of Accounting in Emerging Economies, Emerald Group Publishing Limited, vol. 14(5), pages 937-969, October.
    28. Ranjitha Ajay & R. Madhumathi, 2015. "Institutional Ownership and Earnings Management in India," Indian Journal of Corporate Governance, , vol. 8(2), pages 119-136, December.
    29. Mohammed W.A. Saleh & Marwan Mansour, 2024. "Is audit committee busyness associated with earnings management? The moderating role of foreign ownership," Accounting Research Journal, Emerald Group Publishing Limited, vol. 37(1), pages 80-97, February.
    30. Sumon Kumar Bhaumik & Andros Gregoriou, 2010. "‘Family’ Ownership, Tunnelling And Earnings Management: A Review Of The Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 24(4), pages 705-730, September.
    31. Grzegorz Zimon & Arash Arianpoor & Mahdi Salehi, 2022. "Sustainability Reporting and Corporate Reputation: The Moderating Effect of CEO Opportunistic Behavior," Sustainability, MDPI, vol. 14(3), pages 1-28, January.
    32. Yue Chen & Lingxiang Li & Haizhi Wang & Peng Wang, 2015. "Institutional investors and conservative financial reporting: evidence from China," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 5(1), pages 161-178, June.
    33. Mohammed Benlemlih & Mohammad Bitar, 2018. "Corporate Social Responsibility and Investment Efficiency," Journal of Business Ethics, Springer, vol. 148(3), pages 647-671, March.
    34. Patrick Velte, 2023. "Which institutional investors drive corporate sustainability? A systematic literature review," Business Strategy and the Environment, Wiley Blackwell, vol. 32(1), pages 42-71, January.
    35. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    36. Wu, Keping & Kong, Dongmin & Yang, Wei, 2024. "Does environmental, social, and governance rating affect firms’ real earnings management," Finance Research Letters, Elsevier, vol. 67(PA).
    37. Xing Li & Jeong-Bon Kim & Haibin Wu & Yangxin Yu, 2021. "Corporate Social Responsibility and Financial Fraud: The Moderating Effects of Governance and Religiosity," Journal of Business Ethics, Springer, vol. 170(3), pages 557-576, May.
    38. Kyle Welch & Aaron Yoon, 2023. "Do high-ability managers choose ESG projects that create shareholder value? Evidence from employee opinions," Review of Accounting Studies, Springer, vol. 28(4), pages 2448-2475, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Rajesh Desai, 2026. "Does statutory ESG disclosure stimulate managerial opportunism? Moderating role of board structures and audit committee in an emerging economy," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 23(2), pages 477-501, June.
    2. Nair, Rajiv & Muttakin, Mohammad & Khan, Arifur & Subramaniam, Nava & Somanath, V.S., 2019. "Corporate social responsibility disclosure and financial transparency: Evidence from India," Pacific-Basin Finance Journal, Elsevier, vol. 56(C), pages 330-351.
    3. Zain Ul Abideen, 2025. "The moderating role of investor sentiments between sustainability reporting and firm reputation. Evidence from Chinese listed firms," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 32(1), pages 138-159, January.
    4. Rohan Kumar Mishra & Frank Obenpong Kwabi & Abhijeet Chandra, 2025. "Corporate Social Responsibility, Related Party Transaction and Earnings Management: Evidence from India," Journal of Business Ethics, Springer, vol. 201(2), pages 331-369, October.
    5. Yang Deng & Tze San Ong & Rosmila Senik, 2024. "Trick or treat? A bibliometric literature review of corporate social responsibility and earnings management," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 31(5), pages 4361-4383, September.
    6. Manish Bansal, 2024. "Unpacking the drivers of earnings management in CSR firms: influence of investor risk perception," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 21(1), pages 127-142, March.
    7. Azmi, Wajahat & Hassan, M. Kabir & Houston, Reza & Karim, Mohammad Sydul, 2021. "ESG activities and banking performance: International evidence from emerging economies," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 70(C).
    8. Ghosh, Saibal, 2017. "Why is it a man’s world, after all? Women on bank boards in India," Economic Systems, Elsevier, vol. 41(1), pages 109-121.
    9. Mingzhe Qiao & Shiwei Xu & Guangdong Wu, 2018. "Corporate Social Responsibility and the Long-Term Performance of Mergers and Acquisitions: Do Regions and Related-Party Transactions Matter?," Sustainability, MDPI, vol. 10(7), pages 1-15, July.
    10. Rania Missaoui, 2025. "Corporate investment in corrupt environments: the case of the BRICS countries," SN Business & Economics, Springer, vol. 5(10), pages 1-28, October.
    11. Fay, Scott & Feng, Cong & Patel, Pankaj C., 2022. "Staying small, staying strong? Retail store underexpansion and retailer profitability," Journal of Business Research, Elsevier, vol. 144(C), pages 663-678.
    12. Khayria Amarna & Raquel Garde Sánchez & Maria Victoria López‐Pérez & Mahmoud Marzouk, 2024. "The effect of environmental, social, and governance disclosure and real earning management on the cost of financing," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 31(4), pages 3181-3193, July.
    13. Ashrafee Tanvir Hossain & Amir Hossain & Tom Cooper & Majidul Islam, 2024. "Corporate sexual orientation equality and carbon emission," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 64(2), pages 1491-1524, June.
    14. Maria Giuseppina Bruna & Béchir Ben Lahouel & Brahim Gaies, 2022. "Dans les brumes de l'endogénéité. Une étude critique des relations entre performance sociétale et performance économique," Post-Print hal-04070564, HAL.
    15. Imen Ayadi & Ahmed Imran Hunjra, 2026. "Firms in Times of Economic Uncertainty: Digital Integration to Counter Information Asymmetry and ESG Controversies," Business Ethics, the Environment & Responsibility, John Wiley & Sons, Ltd., vol. 35(1), pages 99-116, January.
    16. Changjun Zheng & Md. Abdul Mannan Khan & Mohammad Morshedur Rahman & Syed Moudud-Ul-Huq & Md. Shahinur Rahman, 2025. "ESG Performance and Financial Stability: A Bibliometric and Meta-Analysis," SAGE Open, , vol. 15(4), pages 21582440251, October.
    17. Nasraoui, Mahbouba & Ajina, Aymen & Herve, Fabrice, 2026. "Economic policy uncertainty, ESG practices, and investment inefficiency in U.S. firms," Economic Modelling, Elsevier, vol. 155(C).
    18. Akron, Sagi & Demir, Ender & Díez-Esteban, José María & García-Gómez, Conrado Diego, 2022. "How does uncertainty affect corporate investment inefficiency? Evidence from Europe," Research in International Business and Finance, Elsevier, vol. 62(C).
    19. Mohamed Chakib Kolsi & Ahmad Al‐Hiyari, 2026. "Boardroom Gender Diversity's Effect on the Relationship Between Corporate Charitable Donations and Earnings Management: Evidence From Borsa Istanbul," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 31(1), pages 1472-1486, January.
    20. Shrestha, Chaman & Andrikopoulos, Panagiotis & Park, Jin Suk, 2025. "ESG rating and financial performance in the emerging markets: The moderating effects of cross-listing and industry type," Research in International Business and Finance, Elsevier, vol. 77(PA).

    More about this item

    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:wly:buseth:v:35:y:2026:i:3:p:2075-2099. 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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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: Wiley Content Delivery (email available below). General contact details of provider: https://onlinelibrary.wiley.com/journal/26946424 .

    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.