The reciprocal effect of environmental, social, and governance (ESG) practices and tax aggressiveness in Indonesian and Malaysian companies
-
Author(s)Heri YantoLink to ORCID Index: https://orcid.org/0000-0002-2030-4680
,
Ain HajawiyahLink to ORCID Index: https://orcid.org/0000-0002-3374-1871
,
Niswah BarorohLink to ORCID Index: https://orcid.org/0000-0003-1089-7360
-
DOIhttp://dx.doi.org/10.21511/ppm.23(1).2025.25
-
Article InfoVolume 23 2025, Issue #1, pp. 339-351
- Cited by
- 3450 Views
-
1133 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
This study highlights the complexity of the relationship between sustainability performance, environment, social and governance (ESG) reporting, and tax aggressiveness, which is a critical concern amidst the increasing demands for corporate social accountability. Companies in Indonesia and Malaysia, especially those in the non-financial sector, face increasing regulatory pressure to meet ESG standards. This study uses 263 Indonesian and 311 Malaysian companies as samples because both countries are prominent emerging markets in Southeast Asia with fast-growing economies, diverse industries, and abundant natural resources. However, aggressive tax avoidance remains a common strategy to maintain financial flexibility. This study aims to examine whether companies with high ESG performance tend to reduce tax avoidance practices or use it as a strategy to cover ESG costs. Through 2SLS regression analysis on 2012–2021 data, the results show that ESG performance has a significant positive effect on tax aggressiveness, where companies with high ESG performance also tend to engage in tax avoidance to cover ESG costs. Conversely, tax aggressiveness positively affects ESG performance because companies increase ESG engagement to reduce reputational risks from aggressive tax practices. The simultaneous test found a reciprocal relationship between the two variables with an R² value of 29.4% for tax aggressiveness and 63.1% for ESG performance. This study suggests stricter regulations to reduce tax avoidance in companies with high ESG performance and provides insights for policymakers in Southeast Asia.
- Keywords
-
JEL Classification (Paper profile tab)Q56, H26, M41, M48
-
References28
-
Tables5
-
Figures0
-
- Table 1. Definition and operationalization of the variables
- Table 2. Sample selection criteria
- Table 3. Descriptive statistics
- Table 4. Multiple regression results for model 1
- Table 5. Multiple regression results for model 2
-
- Amidu, M., Kwakye, T.O., Harvey, S., & Yorke, S.M. (2016). Do firms manage earnings and avoid tax for corporate social responsibility? Journal of Accounting and Taxation, 8(2), 11-27.
- Col, B., & Patel, S. (2019). Going to haven? Corporate social responsibility and tax avoidance. Journal of Business Ethics, 154(4), 1033-1050.
- Davis, A. K., Guenther, D. A., Krull, L. K., & Williams, B. M. (2016). Do socially responsible firms pay more taxes? The Accounting Review, 91(1), 47-68.
- Frank, M. M., Lynch, L. J., & Rego, S. O. (2009). Tax reporting aggressiveness and its relation to aggressive financial reporting. The Accounting Review, 84(2), 467-496.
- Gandullia, L., & Piserà, S. (2020). Do income taxes affect corporate social responsibility? Evidence from European-listed companies. Corporate Social Responsibility and Environmental Management, 27(2), 1017-1027.
- Garriga, E., & Mele, D. (2004). Corporate social responsibility theories: Mapping the territory. Journal of Business Ethics, 53(1), 51-71.
- Hajawiyah, A., Kiswanto, K., Suryarini, T., Yanto, H., & Harjanto, A.P. (2022). The bidirectional relationship of tax aggressiveness and CSR: Evidence from Indonesia. Cogent Business & Management, 9(1), Article 2090207.
- Hasibuan, D. H., & Khomsiyah. (2019). Do corporate social responsibility and corporate governance affect tax aggressiveness? Evidence from Indonesia. Journal of Accounting, Business and Finance Research, 7(1), 8-16.
- Hoi, C. K., Wu, Q., & Zhang, H. (2013). Is corporate social responsibility (CSR) associated with tax avoidance? Evidence from irresponsible CSR activities. The Accounting Review, 88(6), 2025-2059.
- Huseynov, F., & Klamm, B. K. (2012). Tax avoidance, reporting transparency, and corporate social responsibility. Journal of Corporate Finance, 18(4), 804-827.
- Jatiningrum, C., Fauzi, F., & Septarina, L. (2024). Mitigation of tax aggressiveness through good corporate governance company’s website and corporate social responsibility disclosure: Evidence-concentrated ownership companies. Jurnal Dinamika Akuntansi, 16(1), 1-15.
- Karthikeyan, M., & Jain, B. (2017). Relationship between CSR rating and tax avoidance. 2017 IEEE International Conference on Computational Intelligence and Computing Research (ICCIC). Coimbatore, India.
- Kim, J.-B., Li, Y., & Zhang, L. (2011). Corporate tax avoidance and stock price crash risk: Firm-level analysis. Journal of Financial Economics, 100(3), 639-662.
- Lanis, R., & Richardson, G. (2012). Corporate social responsibility and tax aggressiveness: An empirical analysis. Journal of Accounting and Public Policy, 31(1), 86-108.
- Lanis, R., & Richardson, G. (2013). Corporate social responsibility and tax aggressiveness: A test of legitimacy theory. Accounting, Auditing & Accountability Journal, 26(1), 75-100.
- Lanis, R., & Richardson, G. (2015). Is corporate social responsibility performance associated with tax avoidance? Journal Business Ethics, 127, 439-457.
- Mao, C.-W. (2019). The effect of corporate social responsibility on corporate tax avoidance: Evidence from a matching approach. Quality & Quantity, 53, 49-67.
- Marsdenia, & Martani, D. (2018). Environmental CSR disclosure and tax avoidance behavior: Empirical study of Indonesia’s capital market listed company. IOP Conference Series: Earth and Environmental Science, 175, Article 012088.
- Minnick, K., & Noga, T. (2010). Do corporate governance characteristics influence tax management? Journal of Corporate Finance, 16(5), 703-718.
- Pamungkas, I. D., Raihan, M. R., Satata, D. P. I., & Kristianto, A.Y. (2024). Impact of corporate social responsibility between green accounting and sustainable development goals. Jurnal Dinamika Akuntansi, 16(1), 43-57.
- Pranata, I. P. A. A., Adhitanaya, K., Rizaldi, M. F., Winanda, G. B. E., Lestari, N. M. I. D., & Astuti, P. D. (2021). The effect of corporate social responsibility, firm size, and leverage on tax aggressiveness: An empirical evidence. Universal Journal of Accounting and Finance, 9(6), 1478-1486.
- Pratiwi, I. S., & Djakman, C. D. (2017). The role of corporate political connections in CSR and tax avoidance: Evidence from Indonesia. Review of Integrative Business and Economics Research, 6(suppl_1).
- Qodraturrasyid, M. B. R. (2017). The role of risk management systems in moderating the influence of CSR activities on tax aggressiveness (Master’s Thesis). University of Indonesia.
- Rusydi, M. K., & Siregar, S. V. (2014). Pengaruh Pengungkapan CSR Terhadap Aggressive Tax Avoidance [The effect of CSR disclosure on aggressive tax avoidance]. National Seminar of Maranatha Christian University Bandung.
- Shafer, W. E., & Simmons, R. S. (2008). Social responsibility, Machiavellianism and tax avoidance: A study of Hong Kong tax professionals. Accounting, Auditing & Accountability Journal, 21(5), 695-720.
- Sikka, P. (2010). Smoke and mirrors: Corporate social responsibility and tax avoidance. Accounting Forum, 34(3-4), 153-168.
- Wahab, E. A., Ariff, A. M., Marzuki, M. M., & Sanusi, Z. M. (2017). Political connections, corporate governance, and tax aggressiveness in Malaysia. Asian Review of Accounting, 25(3), 424–451.
- Zeng, T. (2021). Corporate social responsibility (CSR) in Canadian family firms. Social Responsibility Journal, 17(5), 703-718.
-
Human resource management in promoting innovation and organizational performance
I Gede Riana ,
Gede Suparna ,
I Gusti Made Suwandana ,
Sebastian Kot ,
Ismi Rajiani
doi: http://dx.doi.org/10.21511/ppm.18(1).2020.10
Problems and Perspectives in Management Volume 18, 2020 Issue #1 pp. 107-118 Views: 6799 Downloads: 1510 TO CITE АНОТАЦІЯHuman resource management (HRM) is one of the elements enabling an organization to remain competitive in turbulence conditions. The effective practice of HRM makes competent and innovative employees contributing to the achievement of organizational objectives. This study aims to analyze HRM practices in creating innovation and organizational performance. The questionnaire was used to measure the respondents’ perceptions of variables used by a Likert scale. A survey of 126 manager samples and middle managers at export-oriented short and medium enterprises (SMEs) in Bali, Indonesia, was conducted to test the model. The analysis has shown that the proposed model was proven to be compliant with the research hypotheses. HRM significantly affects organizational performance and innovation, and it was found out that innovation can improve organizational performance. However, in the process of simultaneous testing, it was found out that innovation cannot improve organizational performance. The lack of attention to investments in human resources became one of the barriers to SMEs in creating innovation.
-
Perceived health risk, online retail ethics, and consumer behavior within online shopping during the COVID-19 pandemic
Yuniarti Fihartini ,
Arief Helmi ,
Meydia Hassan ,
Yevis Marty Oesman
doi: http://dx.doi.org/10.21511/im.17(3).2021.02
Innovative Marketing Volume 17, 2021 Issue #3 pp. 17-29 Views: 6745 Downloads: 2278 TO CITE АНОТАЦІЯThe risk of virus contracting during the COVID-19 pandemic has changed consumer preference for online shopping to meet their daily needs than shopping in brick-and-mortar stores. Online shopping presents a different environment, atmosphere, and experience. The possibility of ethical violations is higher during online than face-to-face transactions. Therefore, this study was conducted to investigate the influence of perceived health risk and customer perception of online retail ethics on consumer online shopping behavior during the COVID-19 pandemic, involving seven variables, namely perceived health risk, security, privacy, non-deception, reliability fulfillment, service recovery, and online shopping behavior. The data were collected through an online survey by employing the purposive sampling technique to a consumer who has shopped online during the COVID-19 pandemic in Indonesia. 315 valid responses were obtained and analyzed through quantitative method using SEM-Amos. The results showed that perceived health risk and four variables of online retail ethics including security, privacy, reliability fulfillment, and service recovery affected online shopping behavior. Meanwhile, non-deception was found to have an insignificant effect. The coefficient value proved perceived health risk to be more dominant in influencing online shopping behavior than the variables of online retail ethics. Thus, consumers pay more concern for their health during online shopping. However, positive consumer perceptions of the behavior of online retail websites in providing services also can encourage consumers to shop online during this pandemic.
-
Effect of internal audit, internal control, and audit quality on fraud prevention: Evidence from the public sector in Indonesia
Henny Zurika Lubis ,
Maya Sari ,
Andi Auliya Ramadhany ,
Debbi Chyntia Ovami ,
Istiqomah Rahmayati Brutu
doi: http://dx.doi.org/10.21511/ppm.22(2).2024.04
Problems and Perspectives in Management Volume 22, 2024 Issue #2 pp. 40-50 Views: 4598 Downloads: 1222 TO CITE АНОТАЦІЯFraud prevention entails developing and implementing risk management strategies, particularly regarding fraud, and establishing internal controls and transparent corporate governance practices to eliminate fraudulent activities. This study aims to examine the effect of internal auditors, internal control, and audit quality on preventing fraud at the Inspectorate of North Sumatra Province, Indonesia. The sample included 61 government internal auditors of the Inspectorate of North Sumatra Province, Indonesia. The data collection process was carried out by administering questionnaires using Google Forms. Additionally, this investigation assessed the constructs under scrutiny using a five-point Likert and the partial least square (PLS) approach. The results showed that internal audit has a positive and significant effect on fraud prevention (p < 0.05), internal control has a positive and significant effect on fraud prevention (p < 0.05), and audit quality has no effect on fraud prevention at the Inspectorate of North Sumatra Province, Indonesia (p > 0.05). The Inspectorate of North Sumatra Province, Indonesia, should conduct internal audits, implement an internal control system, and pay attention to the quality of audits to make them more effective as a basis for quality decision-making and fraud minimization.
