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Does ESG performance affect corporate tax avoidance? Evidence from China

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  • Jiang, Hongli
  • Hu, Wenjie
  • Jiang, Pengcheng

Abstract

This study analyzes whether and how environmental, social, and governance (ESG) performance affects corporate tax avoidance by employing the data of China's A-share listed non-financial firms from 2009 to 2021. The results indicate that ESG performance significantly reduces corporate tax avoidance. The influence channels include alleviating financing constraints, improving the quality of internal control, and strengthening external supervision. Furthermore, the influence of ESG performance on tax avoidance is more pronounced in firms located in regions with underdeveloped FinTech, as well as in firms characterized by higher agency costs and lower audit quality. Overall, our findings indicate that ESG performance is crucial for curtailing tax avoidance behavior.

Suggested Citation

  • Jiang, Hongli & Hu, Wenjie & Jiang, Pengcheng, 2024. "Does ESG performance affect corporate tax avoidance? Evidence from China," Finance Research Letters, Elsevier, vol. 61(C).
    • Handle: RePEc:eee:finlet:v:61:y:2024:i:c:s1544612324000862
    DOI: 10.1016/j.frl.2024.105056
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    8. Nie, Zhiping & Li, Kexin & Zheng, Qingyu, 2025. "Corporate tax avoidance, financing constraints, and pollution emissions: A moral consistency theory perspective," Finance Research Letters, Elsevier, vol. 86(PG).
    9. Hyun-Ah Lee, 2024. "Exploring the Relationship Between Environmental, Social, and Governance and Tax Avoidance Strategies," SAGE Open, , vol. 14(4), pages 21582440241, November.
    10. Wang, Jingzheng & Qin, Xiaoli, 2024. "Tax reduction incentive and corporate financialization," Finance Research Letters, Elsevier, vol. 62(PB).
    11. Supun Chandrasena & Lane Matthews & Ali Meftah Gerged, 2025. "Does the presence of a sustainability committee strengthen the impact of ESG disclosure on tax aggressiveness? Insights from North America," Review of Quantitative Finance and Accounting, Springer, vol. 65(3), pages 1039-1065, October.
    12. Wang, Meixia & Liu, Li & Liang, Tongxin, 2025. "Does the ESG disclosure quality affect financial performance: Empirical evidence from Chinese energy-listed companies," Finance Research Letters, Elsevier, vol. 77(C).
    13. Hai, Benlu & Shi, Hongyan & Piao, Tianyu & Dou, Zhaoheng, 2024. "Digitalization of tax administration and its impact on corporate ESG performance," Finance Research Letters, Elsevier, vol. 68(C).
    14. Yuxuan Zhang & Leihong Yuan & Idawati Ibrahim & Ropidah Omar, 2025. "Sustainability in Question: Climate Risk, Environment, Social and Governance Performance, and Tax Avoidance," Sustainability, MDPI, vol. 17(4), pages 1-21, February.
    15. Probowo Erawan Sastroredjo & Marcel Ausloos & Polina Khrennikova, 2025. "Environmental Performance, Financial Constraint and Tax Avoidance Practices: Insights from FTSE All-Share Companies," Papers 2509.08450, arXiv.org.
    16. Hong Xu & Yukun Li & Weifen Lin & Hui Wang, 2024. "ESG and customer stability: a perspective based on external and internal supervision and reputation mechanisms," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 11(1), pages 1-14, December.
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