Sustainability Reporting and Earnings Management: Between Transparency and Legitimacy - A Systematic Literature Review

Abstract

This research investigates the connection between sustainability reporting and earnings management via a systematic literature review of global studies released from 2019 to 2025. The study seeks to examine the role of sustainability disclosure in balancing transparency and legitimacy in corporate reporting. Employing a qualitative descriptive method, twenty articles indexed in Scopus were analyzed to uncover theoretical patterns and empirical trends across different nations and sectors. The results indicate that superior sustainability reporting and external verification enhance corporate transparency and limit earnings manipulation, aligning with stakeholder and signaling theories. Nonetheless, data from developing economies shows that sustainability reporting is frequently utilized symbolically to uphold legitimacy or conceal opportunistic actions, as clarified by legitimacy and institutional theories. These varied outcomes illustrate that the connection between ESG and earnings management is influenced by the context, including the robustness of governance, regulatory enforcement, and the motives of management. The research underscores the twofold aspect of sustainability reporting—serving either as a true accountability tool or a legitimacy cover—and stresses the necessity for standardized frameworks, trustworthy assurance, and ethical governance to guarantee that sustainability communication demonstrates real rather than merely symbolic transparency