ESG Performance and Tax Avoidance with Board of Commissioners Characteristics as Moderation

Abstract

This study aims to empirically examine the influence of ESG (Environmental, Social, and Governance) performance on tax avoidance and assess the impact of board characteristics on the relationship between ESG performance and tax avoidance. The research explores financial and other data from manufacturing companies listed on the stock exchanges in Indonesia and Malaysia from 2018 to 2022. The findings of this study indicate that ESG performance serves as a strategy to minimize tax avoidance, and the percentage of independent Boards strengthens the relationship between ESG performance and tax avoidance in both Indonesia and Malaysia. However, CEO Duality has not yet been able to strengthen the relationship between ESG performance and tax avoidance in these countries. Practical Implications, these findings have several policy and practical implications that could help regulators minimize tax avoidance by establishing regulations that mandate the implementation and reporting of ESG. In addition, policies aimed at increasing the percentage of independent boards are expected to serve as a monitoring tool to reduce tax avoidance practices. The originality of this research lies in the measurement of board characteristics using two approaches: CEO Duality and the percentage of independent boards, which serve as moderating variables to identify factors that weaken or strengthen the relationship between tax avoidance and ESG performance.