ورقة عمل
When Disclosure Reveals and Conceals: Differential Effects of Environmental, Social, and Governance Pillars on Earnings Management in Saudi Arabia's Vision 2030 Era
Fawwaz Alrwabdah, Ahmad Alomari, Awatif Alsheikh, Warda Alsheikh
Research Square, 2026
الملخص
This paper investigates how the three pillars of environmental, social, and governance (ESG) disclosure differentially shape accrual-based earnings management (AEM) in Saudi Arabia's Vision 2030 era, and how firm profitability moderates these relationships. Using a balanced panel of 135 non-financial firms listed on the Saudi Stock Exchange (Tadawul) over 2016--2024 (1,215 firm-year observations), we estimate hierarchical fixed-effects regressions with Driscoll--Kraay standard errors. We document three findings that challenge the conventional aggregate ESG-AEM literature. First, governance disclosure operates as a substantive constraint on earnings management, while environmental disclosure operates as a camouflage mechanism that increases discretionary accruals; social disclosure shows no detectable effect, consistent with regulatory saturation. Second, profitability fundamentally reshapes these relationships: among unprofitable firms, environmental disclosure facilitates camouflage, but among profitable firms, the same disclosure transitions into a constraining mechanism---a sign reversal that occurs around a return-on-assets threshold of approximately five percent. Third, the governance constraining effect attenuates significantly following the October 2021 Tadawul ESG Disclosure Guidelines, suggesting that mandatory disclosure dilutes the informational value that previously distinguished voluntarily transparent firms. These findings cannot be detected when ESG is treated as an aggregate construct, and they reveal that the constraining-versus-camouflage debate that has long divided the disclosure literature is not a question of which mechanism prevails on average, but of which pillar is observed and under what firm-level conditions. The results carry implications for the design of disclosure regulation in emerging markets, where institutional reform agendas such as Vision 2030 increasingly shape corporate reporting practice. JEL classification: M41, G34, Q56, M48.
التوثيق
Alrwabdah, F., Alomari, A., Alsheikh, A., & Alsheikh, W. (2026). When Disclosure Reveals and Conceals: Differential Effects of Environmental, Social, and Governance Pillars on Earnings Management in Saudi Arabia's Vision 2030 Era. Research Square. https://doi.org/10.21203/rs.3.rs-9861313/v1