ADOPTION OF ESG PRACTICES AND ACCOUNTING FRAUD RISK IN COMPANIES LISTED ON THE B3
DOI:
https://doi.org/10.51320/rmc.v27i1.1670Keywords:
ASG Practices, Fraud Risk, Environmental, Social, and Governance Performance, Sustainability PoliciesAbstract
This study aims to investigate the association between the voluntary adoption of ESG (Environmental, Social, and Governance) practices and the risk of accounting fraud in Brazilian companies listed on the B3. To test the hypothesis, data on the level of ESG practice adoption were collected from Bloomberg, and the risk of fraud was measured using the Altman, Baydia, and Dias (1979) model, re-estimated by Martins and Ventura (2020). The sample comprised 214 non-financial companies listed on the B3 from 2016 to 2022. The panel regression results did not reject the null hypothesis, indicating a correlation between ESG practice adoption and reduced fraud risk. Notably, the Social (S) factor was the most significant among the ESG components in reducing fraud risk, suggesting that stakeholders should closely monitor this aspect. Conversely, the Governance (G) factor did not exhibit statistical significance. The findings provide practical insights for organizational contexts, demonstrating that investments in ESG initiatives can serve as mechanisms to control and mitigate the risk of accounting fraud, potentially enhancing investor confidence and capital market stability.
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