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The impact and mechanisms of green agency costs on corporate tax avoidance tendencies

Author

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  • Dai, Qinghui
  • Wang, Jiawen
  • Liu, Sisi
  • Zhang, Hong

Abstract

With the growing need for synergy between environmental governance and economic development, how companies balance the costs of green transformation with tax compliance strategies has become a critical issue that needs to be addressed. Based on data from A-share listed companies on the Shanghai and Shenzhen stock exchanges between 2010 and 2024, this study empirically examines the impact mechanism of green agency costs on corporate tax avoidance behavior and its heterogeneity characteristics. The findings indicate that green agency costs significantly exacerbate corporate tax avoidance tendencies, with this relationship being mediated through two channels: weakening investment efficiency and increasing financing constraints. Further heterogeneity analysis reveals that the impact of green agency costs on tax avoidance is more pronounced in state-owned enterprises, heavy-polluting industries, and non-Big Four audit samples. Theoretically, this study unveils the mechanism through which resource misallocation in environmental governance indirectly influences tax behavior via non-financial channels, thus extending the research boundaries at the intersection of corporate social responsibility and tax strategy.

Suggested Citation

  • Dai, Qinghui & Wang, Jiawen & Liu, Sisi & Zhang, Hong, 2026. "The impact and mechanisms of green agency costs on corporate tax avoidance tendencies," Finance Research Letters, Elsevier, vol. 96(C).
    • Handle: RePEc:eee:finlet:v:96:y:2026:i:c:s1544612326002904
    DOI: 10.1016/j.frl.2026.109760
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