Biodiversity Risk and Managerial Myopia: Evidence From Real Earnings Management

ABSTRACT Biodiversity loss is no longer merely an ecological crisis but a material financial risk reshaping corporate strategy. This paper investigates the unintended consequences of this pressure by examining whether biodiversity risk disclosure induces managers to engage in real earnings management (REM). Leveraging data from Chinese listed firms between 2009 and 2023, this study finds robust evidence that biodiversity risk significantly increases firms' REM, with an average estimated effect of 0.0085. This suggests that managers resort to operational management disclosure to mask potential performance declines. Mechanism analyses reveal that this opportunistic behavior is primarily triggered by financing constraints, the exit of institutional investors, and policy uncertainty. Furthermore, this study finds this effect is particularly severe in state‐owned enterprises and firms lagging in digital transformation. By exposing the “dark side” of environmental pressure, this study offers timely implications for policymakers and practitioners aiming to mitigate managerial myopia and improve sustainable governance in emerging economies.