This dissertation was written as part of the MSc in Banking, Financial Technology, and
Risk Management at the International Hellenic University. It examines the effect of
Environmental, Social, and Governance (ESG) performance, alongside with
performances on the individual pillars of ESG, on corporate tax avoidance. My data
consists of 1,122 European companies for the years 2012-2021. I capture ESG
performance, as well as its constituents, using Refinitiv’s data. Regarding the tax
avoidance measure, five different measures were regressed. By using the OLS analysis
method, I find that the total ESG score is statistically significant and negative when it is
regressed on three out of the five corporate tax avoidance measures, while the other
two do not present any significance. This suggests that ESG can be used as a method to
mitigate or address tax avoidance strategies. I also evidence a statistically significant and
positive relationship between the social score and the non-conforming tax avoidance
measure. Finally, the environmental score follows the results of the total ESG score,
while the governance score seems to negatively impact only two out of the five different
tax avoidance measures. This implies that integrating environmental and governance
factors into the overall business strategy may help reduce the likelihood of tax
avoidance, while social factors have the opposite effect. Finally, the constituents that
impact the total ESG score the most and consequently contribute to a greater reduction
of tax avoidance are both the environmental and the governance pillars.
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