The Role of ESG in Moderating Corporate Tax Avoidance and Firm Value

https://doi.org/10.35912/sakman.v5i1.4440
Published: Jul 22, 2025

Abstract:

Purpose: This study intends to examine how tax avoidance correlates with firm value, considering ESG factors as variables that influence the relationship.

Methodology/approach: This study uses Ordinary Least Squares (OLS) Regression based on a sample of 47 companies traded on the IDX covering 2018 to 2023, by starting the analysis in 2017. The sampling method used is purposive sampling. To measure tax avoidance, this study uses CETR (Cash Effective Tax Rate), GETR (GAAP Effective Tax Rate), and BTD (Book-Tax Difference), while the evaluation of firm value is done through Tobin's Q. ESG rating is used to assess ESG performance.

Results/findings: Tax avoidance with CETR has no significant effect on firm value, while GETR has a significant negative impact. In contrast, BTD shows a positive correlation. ESG as a moderator has no significant effect on CETR and BTD, but strengthens the negative impact of GETR on firm value.

Conclusions: The impact of tax avoidance on firm value depends on the measurement method. ESG does not consistently weaken the relationship between tax avoidance and firm value.

Limitations: The limitations of this study include research methods that do not fully address the statistical problems of autocorrelation and heteroscedasticity.

Contribution: This study adds insight into the role of ESG in the relationship between tax avoidance and firm value. The results can serve as a guide for managers, investors, and regulators in evaluating tax strategies, sustainability, and firm valuation.

Keywords:
1. ESG
2. Firm Value
3. Tax Avoidance
Authors:
1 . Mantini Kriswanti
2 . Rini Indriani
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How to Cite
Kriswanti, M., & Indriani, R. (2025). The Role of ESG in Moderating Corporate Tax Avoidance and Firm Value. Studi Akuntansi, Keuangan, Dan Manajemen, 5(1), 243–255. https://doi.org/10.35912/sakman.v5i1.4440
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Vol. 5 No. 1 (2025): Juli
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References

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    Chen, X., Hu, N., Wang, X., & Tang, X. (2014). Tax avoidance and firm value: evidence from China. Nankai Business Review International, 5(1), 25–42. https://doi.org/10.1108/NBRI-10-2013-0037

    Chukwudi, V. U., Okegbe, T. O., & Ezejiofor, R. A. (2020). Effect of Tax Planning on Firm Value of Quoted Consumer Goods Manufacturing Firms in Nigeria. International Journal of Finance and Banking Research, 6(1), 1. https://doi.org/10.11648/j.ijfbr.20200601.11

    DJP. (2020). No TiImplementasi Penurunan Tarif Pajak Penghasilan Badan dalam Penghitungan PPh Pasal 29 dan Angsuran PPh Pasal 25. Retrieved April 3, 2020, from https://www.pajak.go.id/en/node/39093

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    Elamer, A. A., Boulhaga, M., & Ibrahim, B. A. (2024). Corporate tax avoidance and firm value: The moderating role of environmental, social, and governance (ESG) ratings. Business Strategy and the Environment, (December 2022), 1–16. https://doi.org/10.1002/bse.3881

    Hasan, M. M., Lobo, G. J., & Qiu, B. (2021). Organizational capital, corporate tax avoidance, and firm value. Journal of Corporate Finance, 70(June), 102050. https://doi.org/10.1016/j.jcorpfin.2021.102050

    Huang, H. H., Lobo, G. J., Wang, C., & Xie, H. (2016). Customer concentration and corporate tax avoidance. Journal of Banking and Finance, 72, 184–200. https://doi.org/10.1016/j.jbankfin.2016.07.018

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    Jung, M., & Kim, Y. L. (2022). The Interaction Effect of ESG and Innovation on Firm Value. Korean Journal of Financial Studies, 51(4), 471–498. https://doi.org/10.26845/KJFS.2022.08.51.4.471

    Kim, J. B., Li, Y., & Zhang, L. (2011). Corporate tax avoidance and stock price crash risk: Firm-level analysis. Journal of Financial Economics, 100(3), 639–662. https://doi.org/10.1016/j.jfineco.2010.07.007

    Kong, L., Akbar, M., & Poulova, P. (2023). The Role of Environment, Social, and Governance Performance in Shaping Corporate Current and Future Value: The Case of Global Tech Leaders. Sustainability (Switzerland), 15(17). https://doi.org/10.3390/su151713114

    Lokanan, M. (2023). The morality and tax avoidance: A sentiment and position taking analysis. In PLoS ONE (Vol. 18). https://doi.org/10.1371/journal.pone.0287327

    Lunawat, A., & Lunawat, D. (2022). Do Environmental, Social, and Governance Performance Impact Firm Performance? Evidence from Indian Firms. Indonesian Journal of Sustainability Accounting and Management, 6(1). https://doi.org/10.28992/ijsam.v6i1.519

    Maitriyadewi, N. L. R. P., & Noviari, N. (2020). Manajemen Laba, Profitabilitas dan Kepemilikan Keluarga dan Tax Avoidance. E-Jurnal Akuntansi Udayana, 1838–1854.

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    Merkusiwati, N. K. L. A., & Eka Damayanthi, I. G. A. (2019). Pengaruh Pengungkapan CSR, Karakter Eksekutif, Profitabilitas, Dan Investasi Aktiva Tetap Terhadap Penghindaran Pajak. E-Jurnal Akuntansi, 29(2), 833. https://doi.org/10.24843/eja.2019.v29.i02.p26

    Metwally, A. B. M., Elsharkawy, A. A. M., & Salem, M. I. (2024). The impact of corporate social responsibility on operating cash flow opacity: the moderating role of tax avoidance. Cogent Business and Management, 11(1). https://doi.org/10.1080/23311975.2024.2390692

    Minh Ha, N. M., Tuan Anh, P., Yue, X. G., & Hoang Phi Nam, N. (2021). The impact of tax avoidance on the value of listed firms in Vietnam. Cogent Business and Management, 8(1). https://doi.org/10.1080/23311975.2021.1930870

    Nebie, M., & Cheng, M. C. (2023). Corporate tax avoidance and firm value: Evidence from Taiwan. Cogent Business and Management, 10(3). https://doi.org/10.1080/23311975.2023.2282218

    Oktiani, F., & Sanulika, A. (2024). Implementasi Strategi Bisnis Dan Pengungkapan Esg Terhadap Tax avoidance. 1(1), 1–18. Retrieved from https://www.kompasiana.com

    Puspitasari, N., & Dilla, Z. S. (2022). Pengaruh Ukuran Perusahaan Terhadap Tax Avoidance Dengan Manajeman Laba Sebagai Moderasi. Jurnal Ekonomi STIEP, 7(2), 42–49. Retrieved from https://stiepontianak.ac.id/jurnal/index.php/jes/article/view/99%0Ahttps://stiepontianak.ac.id/jurnal/index.php/jes/article/download/99/113

    R. Aprilyani Dewi, P. P., Sudana, I. P., Badera, I. D. N., & Rasmini, I. K. (2021). The Effect of CSR Disclosure on Firm Value with Profitability and Leverage as Moderators. Indonesian Journal of Sustainability Accounting and Management, 5(1). https://doi.org/10.28992/ijsam.v5i1.325

    Raharja, A. D. B. (2021). Nilai perusahaan: Indikator, fungsi, dan 6 faktor yang memengaruhinya. Retrieved from https://www.ekrut.com/media/nilai-perusahaan

    Rahayu, I. T., & Subadriyah. (2021). Faktor-Faktor Yang Mempengaruhi Penghindaran Pajak ( Pada Perusahaan Manufaktur Sektor Industri Barang Konsumsi yang Terdaftar Di Bursa Efek Indonesia Tahun 2016-2019 ) Factors Affecting Tax Avoidance ( In Manufacturing Companies in the Consumer Goods Ind. Indonesia Accounting Literacy Journal, 02(01), 269–277.

    Rezki, M. A., Achsani, N. A., & Sasongko, H. (2020). How Does Tax Avoidance Affect Firm Value? (Lessons From Soe and Indonesian Private Companies). Indonesian Journal of Business and Entrepreneurship, 6(3), 215–227. https://doi.org/10.17358/ijbe.6.3.215

    Rudyanto, A., & Pirzada, K. (2020). The role of sustainability reporting in shareholder perception of tax avoidance. Social Responsibility Journal, 17(5), 669–685. https://doi.org/10.1108/SRJ-01-2020-0022

    Samy El-Deeb, M., Ismail, T. H., & El Banna, A. A. (2023). Does audit quality moderate the impact of environmental, social and governance disclosure on firm value? Further evidence from Egypt. Journal of Humanities and Applied Social Sciences, 5(4), 293–322. https://doi.org/10.1108/jhass-11-2022-0155

    Sandy, S. A. (2019). Siklus Hidup Perusahaan Dan Penghindaran Pajak. 9, 93–110.

    Seifzadeh, M. (2022). The Effectiveness of Management Ability on Firm Value and Tax Avoidance. Journal of Risk and Financial Management, 15(11). https://doi.org/10.3390/jrfm15110539

    Siburian, E. P. (2023). Penghindaran Pajak, Income Smoothing Dan Nilai Perusahaan Pada Perusahaan Manufaktur Di Indonesia. Value?: Jurnal Manajemen Dan Akuntansi, 18(2), 373–385. https://doi.org/10.32534/jv.v18i2.4144

    Siew Yee, C., Sharoja Sapiei, N., & Abdullah, M. (2018). Tax Avoidance, Corporate Governance and Firm Value in The Digital Era. Journal of Accounting and Investment, 19(2). https://doi.org/10.18196/jai.190299

    Suardana, K. A. (2014). Pengaruh Corporate Governance , Profitabilitas Dan Karakteristik Eksekutif Pada Tax Avoidance Perusahaan Manufaktur. 2, 525–539.

    Sugiarto, A., Puspani, N. N., & Fathia, F. (2023). ESG Leverage towards Stock Performance in Indonesia Stock Exchange. International Journal of Energy Economics and Policy, 13(5), 593–606. https://doi.org/10.32479/ijeep.14384

    Yu, X., & Xiao, K. (2022). Does ESG Performance Affect Firm Value? Evidence from a New ESG-Scoring Approach for Chinese Enterprises. Sustainability (Switzerland), 14(24), 1–40. https://doi.org/10.3390/su142416940

    Zhou, G., Liu, L., & Luo, S. (2022). Sustainable development, ESG performance and company market value: Mediating effect of financial performance. Business Strategy and the Environment, 31(7), 3371–3387. https://doi.org/10.1002/bse.3089

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  2. Chen, X., Hu, N., Wang, X., & Tang, X. (2014). Tax avoidance and firm value: evidence from China. Nankai Business Review International, 5(1), 25–42. https://doi.org/10.1108/NBRI-10-2013-0037
  3. Chukwudi, V. U., Okegbe, T. O., & Ezejiofor, R. A. (2020). Effect of Tax Planning on Firm Value of Quoted Consumer Goods Manufacturing Firms in Nigeria. International Journal of Finance and Banking Research, 6(1), 1. https://doi.org/10.11648/j.ijfbr.20200601.11
  4. DJP. (2020). No TiImplementasi Penurunan Tarif Pajak Penghasilan Badan dalam Penghitungan PPh Pasal 29 dan Angsuran PPh Pasal 25. Retrieved April 3, 2020, from https://www.pajak.go.id/en/node/39093
  5. Dwi Sakti, A. (2024). Penerapan ESG di Indonesia_ Tantangan dan Harapan (2024) - Indonesia Environment & Energy Center. Environment Indonesia, 1–10. Retrieved from https://environment-indonesia.com/penerapan-esg-di-indonesia-tantangan-dan-harapan-2024/
  6. Elamer, A. A., Boulhaga, M., & Ibrahim, B. A. (2024). Corporate tax avoidance and firm value: The moderating role of environmental, social, and governance (ESG) ratings. Business Strategy and the Environment, (December 2022), 1–16. https://doi.org/10.1002/bse.3881
  7. Hasan, M. M., Lobo, G. J., & Qiu, B. (2021). Organizational capital, corporate tax avoidance, and firm value. Journal of Corporate Finance, 70(June), 102050. https://doi.org/10.1016/j.jcorpfin.2021.102050
  8. Huang, H. H., Lobo, G. J., Wang, C., & Xie, H. (2016). Customer concentration and corporate tax avoidance. Journal of Banking and Finance, 72, 184–200. https://doi.org/10.1016/j.jbankfin.2016.07.018
  9. IEC. (2023). Mengenal ESG (Environmental, Social, and Governance). Retrieved from https://environment-indonesia.com/mengenal-esg-environmental-social-and-governance/
  10. Jung, M., & Kim, Y. L. (2022). The Interaction Effect of ESG and Innovation on Firm Value. Korean Journal of Financial Studies, 51(4), 471–498. https://doi.org/10.26845/KJFS.2022.08.51.4.471
  11. Kim, J. B., Li, Y., & Zhang, L. (2011). Corporate tax avoidance and stock price crash risk: Firm-level analysis. Journal of Financial Economics, 100(3), 639–662. https://doi.org/10.1016/j.jfineco.2010.07.007
  12. Kong, L., Akbar, M., & Poulova, P. (2023). The Role of Environment, Social, and Governance Performance in Shaping Corporate Current and Future Value: The Case of Global Tech Leaders. Sustainability (Switzerland), 15(17). https://doi.org/10.3390/su151713114
  13. Lokanan, M. (2023). The morality and tax avoidance: A sentiment and position taking analysis. In PLoS ONE (Vol. 18). https://doi.org/10.1371/journal.pone.0287327
  14. Lunawat, A., & Lunawat, D. (2022). Do Environmental, Social, and Governance Performance Impact Firm Performance? Evidence from Indian Firms. Indonesian Journal of Sustainability Accounting and Management, 6(1). https://doi.org/10.28992/ijsam.v6i1.519
  15. Maitriyadewi, N. L. R. P., & Noviari, N. (2020). Manajemen Laba, Profitabilitas dan Kepemilikan Keluarga dan Tax Avoidance. E-Jurnal Akuntansi Udayana, 1838–1854.
  16. Meiryani, Huang, S. M., Soepriyanto, G., Jessica, Fahlevi, M., Grabowska, S., & Aljuaid, M. (2023). The effect of voluntary disclosure on financial performance: Empirical study on manufacturing industry in Indonesia. PLoS ONE, 18(6 June), 1–27. https://doi.org/10.1371/journal.pone.0285720
  17. Merkusiwati, N. K. L. A., & Eka Damayanthi, I. G. A. (2019). Pengaruh Pengungkapan CSR, Karakter Eksekutif, Profitabilitas, Dan Investasi Aktiva Tetap Terhadap Penghindaran Pajak. E-Jurnal Akuntansi, 29(2), 833. https://doi.org/10.24843/eja.2019.v29.i02.p26
  18. Metwally, A. B. M., Elsharkawy, A. A. M., & Salem, M. I. (2024). The impact of corporate social responsibility on operating cash flow opacity: the moderating role of tax avoidance. Cogent Business and Management, 11(1). https://doi.org/10.1080/23311975.2024.2390692
  19. Minh Ha, N. M., Tuan Anh, P., Yue, X. G., & Hoang Phi Nam, N. (2021). The impact of tax avoidance on the value of listed firms in Vietnam. Cogent Business and Management, 8(1). https://doi.org/10.1080/23311975.2021.1930870
  20. Nebie, M., & Cheng, M. C. (2023). Corporate tax avoidance and firm value: Evidence from Taiwan. Cogent Business and Management, 10(3). https://doi.org/10.1080/23311975.2023.2282218
  21. Oktiani, F., & Sanulika, A. (2024). Implementasi Strategi Bisnis Dan Pengungkapan Esg Terhadap Tax avoidance. 1(1), 1–18. Retrieved from https://www.kompasiana.com
  22. Puspitasari, N., & Dilla, Z. S. (2022). Pengaruh Ukuran Perusahaan Terhadap Tax Avoidance Dengan Manajeman Laba Sebagai Moderasi. Jurnal Ekonomi STIEP, 7(2), 42–49. Retrieved from https://stiepontianak.ac.id/jurnal/index.php/jes/article/view/99%0Ahttps://stiepontianak.ac.id/jurnal/index.php/jes/article/download/99/113
  23. R. Aprilyani Dewi, P. P., Sudana, I. P., Badera, I. D. N., & Rasmini, I. K. (2021). The Effect of CSR Disclosure on Firm Value with Profitability and Leverage as Moderators. Indonesian Journal of Sustainability Accounting and Management, 5(1). https://doi.org/10.28992/ijsam.v5i1.325
  24. Raharja, A. D. B. (2021). Nilai perusahaan: Indikator, fungsi, dan 6 faktor yang memengaruhinya. Retrieved from https://www.ekrut.com/media/nilai-perusahaan
  25. Rahayu, I. T., & Subadriyah. (2021). Faktor-Faktor Yang Mempengaruhi Penghindaran Pajak ( Pada Perusahaan Manufaktur Sektor Industri Barang Konsumsi yang Terdaftar Di Bursa Efek Indonesia Tahun 2016-2019 ) Factors Affecting Tax Avoidance ( In Manufacturing Companies in the Consumer Goods Ind. Indonesia Accounting Literacy Journal, 02(01), 269–277.
  26. Rezki, M. A., Achsani, N. A., & Sasongko, H. (2020). How Does Tax Avoidance Affect Firm Value? (Lessons From Soe and Indonesian Private Companies). Indonesian Journal of Business and Entrepreneurship, 6(3), 215–227. https://doi.org/10.17358/ijbe.6.3.215
  27. Rudyanto, A., & Pirzada, K. (2020). The role of sustainability reporting in shareholder perception of tax avoidance. Social Responsibility Journal, 17(5), 669–685. https://doi.org/10.1108/SRJ-01-2020-0022
  28. Samy El-Deeb, M., Ismail, T. H., & El Banna, A. A. (2023). Does audit quality moderate the impact of environmental, social and governance disclosure on firm value? Further evidence from Egypt. Journal of Humanities and Applied Social Sciences, 5(4), 293–322. https://doi.org/10.1108/jhass-11-2022-0155
  29. Sandy, S. A. (2019). Siklus Hidup Perusahaan Dan Penghindaran Pajak. 9, 93–110.
  30. Seifzadeh, M. (2022). The Effectiveness of Management Ability on Firm Value and Tax Avoidance. Journal of Risk and Financial Management, 15(11). https://doi.org/10.3390/jrfm15110539
  31. Siburian, E. P. (2023). Penghindaran Pajak, Income Smoothing Dan Nilai Perusahaan Pada Perusahaan Manufaktur Di Indonesia. Value?: Jurnal Manajemen Dan Akuntansi, 18(2), 373–385. https://doi.org/10.32534/jv.v18i2.4144
  32. Siew Yee, C., Sharoja Sapiei, N., & Abdullah, M. (2018). Tax Avoidance, Corporate Governance and Firm Value in The Digital Era. Journal of Accounting and Investment, 19(2). https://doi.org/10.18196/jai.190299
  33. Suardana, K. A. (2014). Pengaruh Corporate Governance , Profitabilitas Dan Karakteristik Eksekutif Pada Tax Avoidance Perusahaan Manufaktur. 2, 525–539.
  34. Sugiarto, A., Puspani, N. N., & Fathia, F. (2023). ESG Leverage towards Stock Performance in Indonesia Stock Exchange. International Journal of Energy Economics and Policy, 13(5), 593–606. https://doi.org/10.32479/ijeep.14384
  35. Yu, X., & Xiao, K. (2022). Does ESG Performance Affect Firm Value? Evidence from a New ESG-Scoring Approach for Chinese Enterprises. Sustainability (Switzerland), 14(24), 1–40. https://doi.org/10.3390/su142416940
  36. Zhou, G., Liu, L., & Luo, S. (2022). Sustainable development, ESG performance and company market value: Mediating effect of financial performance. Business Strategy and the Environment, 31(7), 3371–3387. https://doi.org/10.1002/bse.3089