The Effect of ESG Performance on Tax Avoidance—Evidence from Korea

Yoon, Bo Hyun; Lee, Jeong Hwan; Cho, Jin Hyung

doi:10.3390/su13126729

Cited by 43 publications

(57 citation statements)

References 29 publications

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“…First, our findings emphasize the significance of firm characteristics in shaping the implications of CSR policies. Consistent with the results of Yoon and Lee [10][11][12], our findings show that the unique characteristics of chaebols significantly affect corporate policies and even investor perceptions. The chaebol-affiliated group has significantly different historical backgrounds and investor relationships throughout the rapid growth of the Korean economy.…”

Section: Discussionsupporting

confidence: 90%

“…This work is also closely associated with the literature that focuses on the effect of firm heterogeneity on CSR policy determination [10][11][12]. The distinctive environments for chaebol affiliates result in significantly different relationships between CSR activities and valuation or disclosure quality across chaebol affiliates and non-chaebol affiliates [10,11].…”

Section: Introductionmentioning

confidence: 79%

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Firm-Value Effects of Carbon Emissions and Carbon Disclosures—Evidence from Korea

Lee

Cho

2021

IJERPH

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We examine the association between carbon emissions, carbon disclosures, and firm value for Korean firms, with a particular interest in chaebols, a special type of Korean conglomerate. Using hand-collected carbon emissions and firm-specific data for 841 Korean firms, including 514 chaebols and 335 non-chaebols, we find a significantly positive relationship between carbon emissions and firm value among chaebol affiliates. This result contrasts with previous findings conducted in advanced markets, where investors consider carbon emissions to be destructive. In terms of the voluntary disclosure policy, we find that companies with good environmental performance tend to disclose carbon emissions voluntarily. We further argue that these findings originate from the specific business atmosphere in Korea. Our results support the traditional view of corporations in terms of environmental policy and highlight the importance of firm characteristics and historical developments in the analysis of environmental policy.

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Section: Discussionsupporting

confidence: 90%

Section: Introductionmentioning

confidence: 79%

Firm-Value Effects of Carbon Emissions and Carbon Disclosures—Evidence from Korea

Lee

Cho

2021

IJERPH

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“…The agency costs are part of several types of costs that the firm may incur owing to adopting risky tax avoidance. This latter also generates costs which can be of various types such as sanctions and penalties imposed by the tax authority upon audit, costs of implementing this strategy (time, effort and transaction costs), reputation costs and political costs (Chen et al, 2010;Lanis and Richardson, 2011;Armstrong et al, 2015;Yoon et al, 2021). In the same vein, Wilde and Wilson (2018) state that the corporate tax planning should be a function of three costs: agency costs, implementation costs and outcome costs.…”

Section: Tax Risk and The Firm Valuementioning

confidence: 99%

The interactive impact of tax avoidance and tax risk on the firm value: new evidence in the Tunisian context

Guedrib

Marouani

2023

ARA

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PurposeThe purpose of this study is to examine the interactive impact of tax avoidance and tax risk on the firm value.Design/methodology/approachThis study covers 290 observations on non-financial corporations listed on the Tunisian Stock Exchange for the period ranging from 2008 to 2020, using the multiple linear regression technique.FindingsThe results show that tax avoidance positively affects the firm value while tax risk has a negative influence on the company value. More importantly, tax risk moderates the positive impact of tax avoidance on the firm value. Accordingly, tax avoidance must be considered in conjunction with tax risk when studying the effect on the firm value. The findings of additional analyses indicate that when tax avoidance is associated with a high level of tax risk, it negatively affects the firm value. Thus, investors negatively rate the high-risk tax avoidance.Research limitations/implicationsThe major limitation of this study is that it focuses only on Tunisian listed companies since their financial statements are publicly available. Although the sample is relatively small due to the problem of data availability, it is satisfactory owing to the twelve-year sampling period (from 2008 to 2020). Research implications- The results obtained are of great interest to researchers as they should be more careful in simply using effective tax rates as a measure of risky or aggressive tax avoidance.Practical implicationsThe findings may signal the need for Tunisian firm managers to consider spillovers when adopting risky tax avoidance strategies and to implement a tax risk management policy within the firm. They are also substantial for Tunisian regulators to create requirements for reporting risky tax avoidance practices in the company annual reports to protect the investors’ rights and the society interest in general. The results are also useful for the investors who would like to make good decisions with respect to tax planning strategies. It is not enough to rely on the Effective Tax Rate (ETR) to judge whether or not tax planning is risky. Volatile ETRs, as a proxy of the tax risk, can be useful for them in decision-making.Social implicationsThe results also highlight that risky tax avoidance decreases the firm value, and thus confirm the negative repercussions that such behavior can have not only on the firm, but also on the society in general, as the corporate tax contributes to covering the State public expenditure. Hence, it is considered a general concern.Originality/valueThe present study differs from others in the existing literature. In fact, it examines the joint effect of tax avoidance and tax risk on the firm value for Tunisian listed companies which are characterized by the predominance of agency conflicts between major shareholders and minor ones. Therefore, the authors seek to investigate if small shareholders can penalize risky tax avoidance practices by decreasing the firm value.

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“…Most of the ESG research on South Korean rms have used a domestic ESG measurement such as the Korea Corporate Governance Service (KCGS) database to examine the effects of ESG scores on the performances of the rms [14]- [16]. Although the KCGS database provides comprehensive ESG scores for all South Korean rms from 2004, it fails to capture the global standards of ESG disclosure information.…”

Section: Importance Of This Studymentioning

confidence: 99%

“…Currently, more than 100 rating agencies provide rms' ESG indices using an unstandardized metric based on their own assessment criteria [49]. Despite the variances and inconsistencies in ESG data providers and agencies, the vast literature have adopted the ESG disclosure scores to measure the ESG practices of the rms in empirical studies [50].…”

Section: Esgmentioning

confidence: 99%

Do ESG Ratings Affect Firm Performance of Multi Business Groups? The Role of Board Characteristics in Firm Performance Mediated by Governance Score

Kim

Meivitawanli

2022

Preprint

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The interest of Environmental, Social, and Governance (ESG) scores is increasing in both academic research and industry practices. Many previous studies have examined the effects of ESG scores on the operating and market performance of firms but have found mixed results. The objective of this study is to provide a preliminary analysis of the effect of ESG scores on financial performances of the Korean multi-business group conglomerates, the Chaebols. Using a panel sample for fixed/random effects in regression analyses, this study investigates a sample of all the 32 Chaebol firms in the period of 2014–2019. Our results showed that the governance score of the firm has a positive effect on financial performances. Further, we analyzed the factors affecting governance scores of the firm in relation to board characteristics. Out of four independent variables, three showed significant results. These are CEO duality, the board size, and the average age of board members of the firms. The results remain consistent and significant after robustness testing.

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The Effect of ESG Performance on Tax Avoidance—Evidence from Korea

Cited by 43 publications

References 29 publications

Firm-Value Effects of Carbon Emissions and Carbon Disclosures—Evidence from Korea

Firm-Value Effects of Carbon Emissions and Carbon Disclosures—Evidence from Korea

The interactive impact of tax avoidance and tax risk on the firm value: new evidence in the Tunisian context

Do ESG Ratings Affect Firm Performance of Multi Business Groups? The Role of Board Characteristics in Firm Performance Mediated by Governance Score

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