Corporate Environmental Information Disclosure and Earnings Management in China: Ethical Behaviour or Opportunism Motivation?

Round 1

Reviewer 1 Report

My suggestions to improve the paper are:

1.      Introduction

The introduction should be improved. The paper identifies some motivation regarding the importance of the study, but the authors should improve it as well as the contributions of the paper for the literature and for the practice.

2.       Theoretical Analysis and Research Hypothesis

A theoretical link between Earnings Management and Earnings Quality should be provided as the first hypothesis considers that the concepts are related.

Several theories are used to support the formulation of the hypotheses. However, contrary to the most studies of EM, agency theory is not mentioned.  For some particular reason? How might this theory be useful to interpret the results of the study?

Hypothesis 3 should be rewrite. It is not very clear what do you mean by “positively adjust”.

3.       Data and Methodology

Methodologic choices should be better explained and justified.

Why are Shanghai and Shenzhen chosen?  

A better description of the sample construction is needed, we only know the final sample size.

Why is not considered AEM as dependent variable in models 2 to 4, as it is in model 1?

Why is the fixed-effects model used (page 7, line 324)?

In page 7 the  model used should be better identified: “ This paper utilises the modified Jones model”, modified by whom? By the way, you this reference should be included.  

In pages 7 and 8, REV should not be revenues, instead of operating income? Then, change in REV is described as “change of business income”, shouldn’t be change of operating income for consistency? Also in model 12, the numerator is Sales and it is described as Revenues. The variables must be defined more precisely.

The EID index considers the maximum possible score of 42. Shouldn´t it be a relative index, meaning that the “not applicable items” should be remove from the denominator? Or there are not “not applicable items”.

4.       Empirical Results and Discussion

In general, I think that the results should be deeply discussed.

Additionally, as the sample was divided into two subsamples: positive REM and negative REM to further analyse the relation between EID and EM, why don’t do the same type of analysis for AEM?

It is not clear how the firms are classified in terms of life cycle (page 19).

5.       Research Conclusions and Implications

The conclusion is well organized and concise, but the limitations of the study are missing.

Minor issues:

The term CRS appears for the first time on page 3, line 124, the term CRS appears for the first time on the page but is only defined on the page 4, line 158.

Concepts should be presented based on previous research definitions. Some examples are Earnings Management (page 2, line 72) and Management Competency (page 5, line 239).

It should be MC and not MA in Model (3), page 7, line 327.

Table 1, page 10, for AEM, the variable description should be |DA| from Modified Jones Model, to be consistent with the other variable descriptions.

Page 11, line 438, should be “sample” and not “samples”, and line 460 it should be EM and not ER.

Table 2, values for Top1 should be presented in the same scale as the other variables, i.e. the mean should be 0.3519 and not 35.19, and so on.

Page 12, line 472, EID and AEM are positively correlated and not negatively.

Good Luck!

Author Response

Please see the attachment.

Author Response File: Author Response.pdf

Reviewer 2 Report

The paper examines the impact of corporate environmental information disclosure on earnings management in China. In general, the paper is well-written and easy to follow. The topic is interesting and connects with a variable with significant managerial importance. Furthermore, many of the issues it deals with have received increased attention as our society

The paper’s motivation is rather general and weak. Taken as a whole, the authors did not successfully frame their ideas in a neat story. The introduction does not develop a coherent and convincing narrative. I am not sure how this investigation adds to the overall body of work in this domain. There need to frame the introduction into a central theme. Overall, I think the paper’s motivation is rather general.

There should be a discussion section that brings the results together. The Research Conclusions and implications section appears very underwhelming and comes across as underdeveloped. The discussion should have separate implications for research and implication for practice that is thorough and in-depth. The current form does not adequately reflect the value of the research. Similarly, the implications and the conclusions should be separated and expanded.

The quality of english is good.

Author Response

Please see the attachment.

Author Response File: Author Response.pdf

Round 2

Reviewer 1 Report

I have no more comments.