Impact of ESG Disclosure on Real Earnings Management with Firm Size Moderation: A Study on Textile and Retail Sectors
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Abstract
This study aims to analyze the effect of Environmental, Social, and Governance (ESG) disclosure on Real Earnings Management (REM), with firm size as a moderating variable. Employing an associative quantitative research design, samples were selected using a purposive sampling method, yielding 14 textile, garment, and retail companies listed on the Indonesia Stock Exchange for the 2022–2024 period. Data were analyzed using the Random Effects (RE) model, with a Fixed Effects (FE) model applied as a robustness check. The results indicate that the moderation model offers superior explanatory power, demonstrated by a significant increase in the coefficient of determination from 0.046 to 0.304 after the interaction variable was introduced. The findings prove that ESG disclosure has a negative effect on REM, but this relationship is positively moderated by firm size. This indicates that in larger firms, the effectiveness of ESG in suppressing earnings manipulation tends to weaken due to operational complexity and legitimacy pressures. This study confirms that firm size is an essential component in evaluating the integrity of sustainability reporting.
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