ESG Performance and Accounting Conservatism The Moderating Role of Lease Intensity in Nordic Listed Firms after IFRS 16

Abstract

This study examines the association between ESG performance and conditional accounting conservatism in Nordic listed firms, and whether lease intensity moderates that relationship. Using the Ball and Shivakumar (2005) accruals model, we analyse 321 non-financial firms listed in Sweden and Norway over 2020 to 2025, yielding 1,564 firm-year observations. ESG data, including separate Environmental, Social, and Governance pillar scores, come from S&P Global. The composite ESG score shows a positive and marginally significant association with conservatism. Disaggregating ESG reveals that the Environmental and Social pillars are each individually significant at the 5% level, while Governance is not, indicating that composite scores mask meaningful variation across dimensions. Lease intensity weakens the ESG conservatism link; when measured as a binary indicator distinguishing firms with any leasing from those without, the moderating effect is highly significant, consistent with the argument that lessors do not monitor firms the way bank creditors do. A reverse regression raises a potential endogeneity concern, so findings are best interpreted as associations rather than causal effects. The study contributes by linking the ESG, conservatism and lease accounting literatures, providing Nordic evidence, and pointing out the importance of studying ESG pillars separately when studying financial reporting quality