Corporate tax avoidance and firm value: The moderating role of environmental, social, and governance (ESG) ratings

Ahmed A. Elamer; Mounia Boulhaga; Bassam A. Ibrahim

doi:10.1002/bse.3881

journal article Open Access Jul 15, 2024

Corporate tax avoidance and firm value: The moderating role of environmental, social, and governance (ESG) ratings

Ahmed A. Elamer

Mounia Boulhaga

Bassam A. Ibrahim

Business Strategy and the Environment Vol. 33 No. 7 pp. 7446-7461 · Wiley

View at Publisher Save 10.1002/bse.3881

Abstract

AbstractIn this study, we examine how managers in firms that have practiced tax avoidance strategically use sustainability activities together with their tax avoidance practices. More specifically, we investigate the moderating impact of ESG on the association between tax avoidance and firm value. Using a sample of French‐listed companies during the years 2012–2021, we hypothesized and found that ESG rating negatively and significantly moderates the relationship between corporate tax avoidance and firm market valuation. Overall, our results suggest that investors reward firms for good ESG performance, perceiving such companies as more valuable. However, when these firms engage in higher tax liabilities, the positive effect of ESG on firm value is slightly reduced. This nuanced insight highlights the importance of considering how tax strategies interact with ESG initiatives in shaping overall firm value. This study, thus, provides theoretical and practical consequences that will encourage businesses and politicians to promote sustainable development. Our findings remain robust to an array of tests, including a number of different tax avoidance measures and potential endogeneity problems.

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Details

Published: Jul 15, 2024
Vol/Issue: 33(7)
Pages: 7446-7461
License: View

Authors

A

Ahmed A. Elamer

Brunel Business School Brunel University London London UK; Gulf Financial Center Gulf University for Science and Technology (GUST) Kuwait Kuwait; UNEC Accounting and Finance Research Center Azerbaijan State University of Economics (UNEC) Baku Azerbaijan; Department of Accounting, Faculty of Commerce Mansoura University Mansoura Egypt

M

Mounia Boulhaga

Faculty of Economic Sciences and Management of Sfax University of Sfax Sfax Tunisia

B

Bassam A. Ibrahim

Department of Business Administration, College of Business Imam Mohammad Ibn Saud Islamic University Riyadh Saudi Arabia; Department of Management, Faculty of Commerce Mansoura University Mansoura Egypt

Cite This Article

Ahmed A. Elamer, Mounia Boulhaga, Bassam A. Ibrahim (2024). Corporate tax avoidance and firm value: The moderating role of environmental, social, and governance (ESG) ratings. Business Strategy and the Environment, 33(7), 7446-7461. https://doi.org/10.1002/bse.3881

Corporate tax avoidance and firm value: The moderating role of environmental, social, and governance (ESG) ratings

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