Do ESG practices mediate the relationship between board characteristics and tax avoidance in G20 countries?

Abstract

Purpose

This study aims to investigate the direct and indirect relationship between board characteristics and corporate tax avoidance using the environmental, social and governance (ESG) index as a mediating variable in G20 countries.

Design/methodology/approach

To test the direct and indirect effects between board characteristics and tax avoidance using structural equation model analysis, this study used a panel data set of 522 companies from G20 countries between 2015 and 2021.

Findings

The regression results show that ESG reporting mediates the relationship between the board of directors and tax avoidance in G20 countries.

Practical implications

The findings have some policy and practical implications that may help regulators improve the quality of transactions and achieve more efficient market supervision. They recommend that governments implement regulations and restrictions on corporate tax avoidance through board mechanisms in G20 countries.

Social implications

The paper enables information users to assess future growth opportunities by emphasizing the importance of ESG policies and board characteristics in evaluating companies.

Originality/value

Although previous literature has investigated the direct relationship between the board of directors and tax avoidance, the present work focused on considering the direct and indirect association between the board of directors and tax avoidance through the mediating effect of ESG reporting, which has not been widely used in ESG studies so far.

Citation

Khlifi, S., Chouaibi, Y. and Chouaibi, S. (2025), "Do ESG practices mediate the relationship between board characteristics and tax avoidance in G20 countries?", Corporate Governance, Vol. 25 No. 2, pp. 288-310. https://doi.org/10.1108/CG-11-2023-0498