ESG controversies and corporate tax avoidance

Abstract

This study examines the association between environmental, social, and governance (ESG) controversies and corporate tax avoidance. Employing the sample of US companies, we find that firms with ESG controversies are more likely to engage in tax-sheltering activities. Firms with controversies are perceived as lacking acceptable legitimacy, and our results suggest that those firms tend to avoid the payment of corporate tax, a fundamental example of a company's citizenship behaviour. This paper explores an aspect of ESG controversies as an indicator of firms' behaviour.