Does ESG performance affect corporate tax avoidance? Evidence from China

This study analyzes whether and how environmental, social, and governance (ESG) performance affects corporate tax avoidance by employing the data of China's A-share listed non-financial firms from 2009 to 2021. The results indicate that ESG performance significantly reduces corporate tax avoidance. The influence channels include alleviating financing constraints, improving the quality of internal control, and strengthening external supervision. Furthermore, the influence of ESG performance on tax avoidance is more pronounced in firms located in regions with underdeveloped FinTech, as well as in firms characterized by higher agency costs and lower audit quality. Overall, our findings indicate that ESG performance is crucial for curtailing tax avoidance behavior.