TAX AVOIDANCE AND FIRM VALUE IN INDONESIA’S ENERGY AND MINING SECTORS: THE MODERATING ROLE OF ESG DISCLOSURE

Inet Maryana Luhmaningtias; Basuki Basuki

doi:10.29303/jaa.v11i1.885

Authors

Inet Maryana Luhmaningtias Universitas Airlangga
Basuki Universitas Airlangga

DOI:

https://doi.org/10.29303/jaa.v11i1.885

Keywords:

ESG Disclosure, Energy and Mining Sector, Firm Value, Tax Avoidance, Tobin’s Q

Abstract

This study examines the relationship between tax avoidance and firm value and whether environmental, social, and governance (ESG) disclosure moderates this relationship. The study focuses on energy and mining companies listed on the Indonesia Stock Exchange during the 2021–2024 period. The final firm sample consists of 33 companies, producing 132 potential firm-year observations. After excluding five firm-year observations with negative earnings before tax, the final regression sample consists of 127 firm-year observations. Firm value is measured using Tobin’s Q, tax avoidance is proxied by the Cash Effective Tax Rate (CETR), and ESG disclosure is measured through a manually constructed disclosure index based on annual reports and sustainability reports. The hypotheses are tested using the Fixed Effects Model with firm-level cluster-robust standard errors. The results show that CETR is not significantly associated with Tobin’s Q. ESG disclosure is also not significantly associated with Tobin’s Q, and the interaction between CETR and ESG disclosure is statistically insignificant. These findings indicate that this study does not find statistically significant associations among tax avoidance, ESG disclosure, their interaction, and firm value within the specified sample, period, measurement approach, and model specification. The study highlights the need to improve the quality, credibility, and consistency of ESG disclosure in relation to corporate tax practices.

References

Alomair, M., & Metwally, A. B. M. (2025). Does ESG disclosure matter for the tax avoidance–firm value relationship? Evidence from an emerging market. Sustainability, 17(9), Article 3836. https://doi.org/10.3390/su17093836

Amarna, K., López-Pérez, M. V., Garde-Sánchez, R., & Rodríguez-Ariza, L. (2025). ESG information disclosure and its relationship to tax practices: Stakeholder-friendly or legitimacy-seeking? Sustainable Development, 33, 3906–3917. https://doi.org/10.1002/sd.3333

Baltagi, B. H. (2021). Econometric analysis of panel data (6th ed.). Springer.

Bani-Khaled, S., Azevedo, G., & Oliveira, J. (2025). Environmental, social, and governance (ESG) factors and firm value: A systematic literature review of theories and empirical evidence. AMS Review, 15, 228–260. https://doi.org/10.1007/s13162-025-00303-2

Desai, M. A., & Dharmapala, D. (2009). Corporate tax avoidance and firm value. The Review of Economics and Statistics, 91(3), 537–546. https://doi.org/10.1162/rest.91.3.537

Dyreng, S. D., Hanlon, M., & Maydew, E. L. (2008). Long-run corporate tax avoidance. The Accounting Review, 83(1), 61–82. https://doi.org/10.2308/accr.2008.83.1.61

Elamer, A. A., Boulhaga, M., & Ibrahim, B. A. (2024). Corporate tax avoidance and firm value: The moderating role of environmental, social, and governance (ESG) ratings. Business Strategy and the Environment, 33(7), 7446–7461. https://doi.org/10.1002/bse.3881

Global Reporting Initiative. (2021). GRI 1: Foundation 2021. Global Reporting Initiative.

Hamdouni, A. (2025). Value creation through environmental, social, and governance (ESG) disclosures. Journal of Risk and Financial Management, 18(8), Article 415. https://doi.org/10.3390/jrfm18080415

Hanlon, M., & Heitzman, S. (2010). A review of tax research. Journal of Accounting and Economics, 50(2–3), 127–178. https://doi.org/10.1016/j.jacceco.2010.09.002

Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305–360. https://doi.org/10.1016/0304-405X(76)90026-X

Otoritas Jasa Keuangan. (2017). Peraturan Otoritas Jasa Keuangan Nomor 51/POJK.03/2017 tentang penerapan keuangan berkelanjutan bagi lembaga jasa keuangan, emiten, dan perusahaan publik. Otoritas Jasa Keuangan.

Otoritas Jasa Keuangan. (2021). Surat Edaran Otoritas Jasa Keuangan Nomor 16/SEOJK.04/2021 tentang bentuk dan isi laporan tahunan emiten atau perusahaan publik. Otoritas Jasa Keuangan.

Postiglione, M., Carini, C., & Falini, A. (2024). ESG and firm value: A hybrid literature review on cost of capital implications from Scopus database. Corporate Social Responsibility and Environmental Management, 31(6), 6457–6480. https://doi.org/10.1002/csr.2940

Sari, D. P., Fikri, M., Kartika, R., & Tanwattana, N. (2025). Corporate governance, ESG disclosure, and firm value: Evidence from public companies in Indonesia. Journal of Economics and Management, 3(2), 50–59. https://doi.org/10.70716/ecoma.v3i2.235

Suchman, M. C. (1995). Managing legitimacy: Strategic and institutional approaches. Academy of Management Review, 20(3), 571–610. https://doi.org/10.2307/258788

Tang, M., Hu, Y., Hou, Y., Oxley, L., & Goodell, J. W. (2025). Fintech development, corporate tax avoidance and firm value. International Review of Financial Analysis, 97, Article 103765. https://doi.org/10.1016/j.irfa.2024.103765

Wooldridge, J. M. (2010). Econometric analysis of cross section and panel data (2nd ed.). MIT Press.

Yuan, W., Zhang, M., Guo, X., & Jiang, Y. (2025). ESG disclosure and firm long-term value: The mediating effect of tax avoidance. Finance Research Letters, 83, Article 107728. https://doi.org/10.1016/j.frl.2025.107728