SUSTAINABILITY OF THE FIRM ALONG WITH EARNINGS MANAGEMENT, EVIDENCE FROM MIDDLE EAST

Abstract

The objective of this study is to examine the influence of sustainability involvement on profit management practices within the Jordanian context for the year 2018. This aligns with the United Nations Sustainable Development Goals (SDGs), particularly Goal 12 and its sub-target 12.6, which highlight the importance of integrating sustainable practices and sustainability-related information into corporate disclosures. The research sample comprises forty-seven firms listed on the Amman Stock Exchange’s first market. The analysis incorporates multiple control variables including board size, firm age, firm size, financial performance, financial leverage, and the presence of financial losses. The findings reveal a negative though statistically insignificant relationship between sustainability involvement and earnings management, suggesting that firms demonstrating higher ESG engagement tend to exhibit lower levels of earnings manipulation. This study represents the first attempt to explore the impact of sustainability involvement on earnings management behaviour using a sample of shareholding firms listed in the first market in Jordan. These results contribute to the emerging body of literature examining corporate governance mechanisms within the Middle Eastern context and provide insights into the role of sustainability reporting in constraining earnings management behavior among Jordanian corporations.