ESG (Environment, Social, Governance) performance and corporate tax avoidance: Evidence from European firms

Abstract

<p><span style="font-weight: 400;">This study examines the relationship between ESG (Environment, Social, Governance) performance and corporate tax avoidance in Europe during the 2015 - 2023 period, finding that high performance enhances tax avoidance to maximize profits. The finding also shows that this effect is more pronounced in large-scale firms and those with low Return on Assets (ROA), suggesting different strategic motives and financial distress across European firms. These findings alert policymakers and investors to the unintended consequences of ESG regulations and highlight the need to integrate tax oversight into sustainability frameworks and ESG practices.</span></p>