The impact of Earnings Management and Firm Performance on Sustainability Reporting: Evidence from Firms that offer Sharia-Complaint Products and Services in Malaysia


  • Uea-Umporn Tipayatikumporn
  • Kanjana Potivichayanont
  • Euamporn Sirirat


It is a general perception that earning management (EM) is an unethical practice because accounting figures are based on the discretion of management and biased information can manipulate the financial data disclosed to stakeholders. Nevertheless, firms engage itself in societal welfare and take steps for the improvement of social conditions and their concern is beyond profit orientation approach. The purpose of this research is to analyze the association between sustainability disclosure and EM in the firms that are offering Islamic products. The theoretical foundation of this research is supported by an Islamic point of view because this study is based on firms that are offering Islamic products and services. The study utilized panel data to investigate the impact of EM and firm performance on sustainability reporting (SR). The sample of this study is based on the 30 Malaysians firms offering Islamic product and services over the period 2015-2018. SR is operationalized through the well-renowned framework i.e. GRI, whilst EM is operationalized on the basis of the Modified Jones Model and ROA is used to measure financial performance. It is evident from the finding that the firms that have sound financial performance, leads to better SR. While insignificant findings revealed among EM and sustainability reports. This study has answered a long-awaited question, whether financial performance leads to SR or SR leads to financial performance. Conclusively, this argument is valid in both contexts.