ESG Effect on Earnings Management in Manufacturing and Non－Manufacturing Sectors : Focused on Chinese Companies with COVID－19

[Purpose] This study investigates the relationship between ESG performance and earnings management among A－share listed companies in China, with a specific focus on manufacturing and non－manufacturing sectors during the COVID－19 period. The aim is to understand how ESG performance impacts earnings management in these different sectors under pandemic conditions. [Methodology] A quantitative research approach is used, analyzing data from 2017 to 2021. The Huazheng ESG score is used to measure ESG performance, while real earnings management metrics are employed to assess earnings manipulation. The study compares the effects of ESG on earnings management in manufacturing versus non－manufacturing sectors. [Findings] The findings reveal that higher ESG scores lead to a significant reduction in real earnings management in both manufacturing and non－manufacturing sectors. However, the COVID－19 pandemic resulted in increased earnings management and a weakened ESG effect, with these impacts varying between them. [implications] The study highlights the need for sector－specific strategies to enhance ESG performance and manage earnings manipulation, especially during crises like the COVID－19 pandemic. Additionally, the results underscore the importance of establishing robust ESG disclosure standards to ensure consistent and transparent reporting, aiding both investors and corporate managers in making informed decisions.