The Impact of Corporate ESG Performance on Corporate Tax Avoidance
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Keywords
ESG performance, corporate tax avoidance, financing constraints, mechanism analysis
Abstract
ESG performance has increasingly become an important means for firms to reconcile short-term financial objectives with long-term sustainable development. Nevertheless, the informational role and economic consequences of ESG performance have not yet been sufficiently examined in existing theoretical research. This study finds that firms with better ESG performance are associated with significantly lower levels of tax avoidance. Further mechanism analysis shows that strong ESG performance helps ease firms’ financing constraints, thereby weakening the incentive to rely on tax avoidance for capital accumulation. Additional heterogeneity analyses indicate that this inhibitory effect is more evident in non-state-owned enterprises, firms with higher-quality internal controls, and firms receiving greater analyst attention. The findings enrich the literature on the economic consequences of ESG performance and provide empirical support for promoting corporate ESG governance as a means of restraining aggressive tax avoidance behavior.
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