International Journal of Finance & Managerial Accounting

International Journal of Finance & Managerial Accounting

Real Earnings Management as a Barrier to Achieving Sustainable Development Goals (SDG)

Document Type : Original Article

Authors
Keramamt Allh Heydari Rostami 1
Mohmmadtaghi Kabiri 2
Elham Darajati 3
1 Assistant Professor, Department of Accounting, Faculty of Administrative and Economic Sciences, Arak University, Arak, Iran
2 Assistant Professor, Department of Management, Faculty of Administrative and Economic Sciences, Arak University, Arak, Iran.
3 Postdoctoral Student, Department of Accounting, Faculty of Administrative and Economic Sciences, Arak University, Arak, Iran..
10.22034/ijfma.2025.78581.2269
Abstract
“Real Earnings Management (REM) presents a significant challenge to aligning corporate practices with Sustainable Development Goals (SDGs) in emerging markets. This study investigates how REM hinders SDG achievement by undermining Environmental, Social, and Governance (ESG) disclosures and sustainable practices. Focusing on a case study in TSE, an emerging market with unique socio-economic and cultural dynamics, the research explores the interplay between REM and SDG-related outcomes. Data from publicly listed firms in TSE (2018-2023) are analyzed to assess how REM affects ESG performance and SDG alignment. Findings reveal REM, through expense manipulation and overproduction, distorts financial transparency, reduces stakeholder trust, and impedes progress toward SDGs, particularly SDG 12 (Responsible Consumption and Production) and SDG 16 (Peace, Justice, and Strong Institutions). Firms engaging in high REM exhibit lower ESG scores and weaker SDG contributions, driven by short-term profit motives. Cultural and regulatory factors in emerging markets exacerbate these effects, creating barriers to sustainable development. The research proposes enhanced regulatory oversight, stronger governance mechanisms, and stakeholder engagement to mitigate REM’s adverse impacts. Integrating agency and stakeholder theories, the study offers a novel perspective on how financial manipulation undermines global sustainability goals. Results have implications for policymakers, corporate leaders, and investors aiming to foster sustainable development in emerging economies. The study also underscores the need for tailored ESG frameworks accounting for local market dynamics. This article links REM to SDG outcomes, offering practical recommendations for aligning corporate strategies with global sustainability agendas in emerging markets.”
Keywords
Real Earnings Management
Sustainable Development Goals
ESG Disclosure
Emerging Markets
Corporate Governance
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