Benedetti, H., Karim, M., Sarkar, S., & Spieler, A. C. (2025). Green Density and Spillover Effects on Earnings Management. International Review of Economics & Finance, 100, 104080.

We examine the link between earnings management and the environmental ratings’ geographic spillover effect. Additionally, we explore the potential moderating impact of regional cultural traits like religiosity and political leanings. Using a sample of 18,012 firm-year observations, of 2319 publicly traded US firms, from 2010 to 2022, we find a negative relationship between green density and real activity-based earnings management such as abnormal production costs, abnormal discretionary expenses, and a combined measure of real activity-based earning management. These results hold even after including cultural and social standards of a geographic area such as religiosity and political affiliation.