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ESG performance and cash effective tax rates: Evidence from UK listed firms

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  • Binhadab, Nouf

Abstract

This paper investigates the relationship between cash effective tax rates (ETRs) and environmental, social, and governance (ESG) performance using a firm level analysis of the Financial Times Stock Exchange 100 (FTSE 100) and FTSE 250 firms. The findings show a positive correlation between ESG performance and cash ETRs. The findings are robust to an instrumental variable approach that controls for the potential endogeneity between ESG performance and cash ETRs. For non-financial firms, this positive correlation between ESG performance and cash ETRs is particularly driven by the environmental aspect of ESG performance, whereas it is driven by the social and governance aspects of ESG performance for financial firms. Additional analysis indicates that the corporate social responsibility (CSR) strategy dimension, which measures a firm’s integration of CSR aspects into its daily decision making, has a positive impact on cash ETRs. The findings seem to suggest that corporate culture can influence tax strategies.

Suggested Citation

  • Binhadab, Nouf, 2025. "ESG performance and cash effective tax rates: Evidence from UK listed firms," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 58(C).
    • Handle: RePEc:eee:jiaata:v:58:y:2025:i:c:s1061951825000060
    DOI: 10.1016/j.intaccaudtax.2025.100683
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