The Shift Toward Sustainability Disclosure (ESG) under IFRS S1 and IFRS S2 and Its Impact on Earnings Management: An Analytical Study of Saudi Aramco’s Reports.

Abstract

This study examines the impact of mandatory sustainability disclosure under IFRS S1 and IFRS S2 on earnings management practices, using a case study of Saudi Aramco’s reports from 2023 to 2025. The research addresses whether enhanced sustainability disclosure can reduce information asymmetry and limit managerial opportunism.

     Adopting a descriptive analytical approach and drawing on Agency and Signaling theories, the study finds a gradual improvement in sustainability disclosures, particularly in climate-related reporting and risk management. The results suggest that enhanced ESG disclosure is associated with reduced earnings management and improved earnings quality, thereby strengthening investor confidence and market efficiency.