TY - JOUR

T1 - Sustainable institutional investors, corporate sustainability performance, and corporate tax avoidance

T2 - Empirical evidence for the European capital market

AU - Velte, Patrick

N1 - Funding Information: Open Access funding enabled and organized by Projekt DEAL. Publisher Copyright: © 2023 The Author. Corporate Social Responsibility and Environmental Management published by ERP Environment and John Wiley & Sons Ltd.

PY - 2023/9

Y1 - 2023/9

N2 - This study addresses the influence of sustainable institutional investors (SII), based on the signatory status of the UN Principles for Responsible Investment (PRI), on corporate tax avoidance. Moreover, the moderating influence of corporate sustainability performance (CSP) is analyzed. The analyses concentrate on a European sample consisting of 1689 firm-year observations between 2014 and 2020 (EUROSTOXX 600) embedded in a stakeholder agency theoretical framework. Correlation, regression, and robustness analyses are conducted. The results are in line with prior studies on equity ownership and tax avoidance and indicate that SII have a negative impact on tax avoidance and that CSP strengthens this negative effect. These results are robust to a battery of sensitivity analyses. SII represent a major monitoring mechanism in promoting responsible tax behavior, which is in line with other stakeholders' interests. Tax avoidance should be integrated into overall sustainability management to realize an increased firm reputation. As the European Commission initiated several regulations on sustainable finance, sustainability reporting, and tax disclosure, the empirical results stress the interdependencies between ownership structure, CSP, and tax avoidance. The study makes a major contribution to prior analyses, as this study is the first to assess the link between SII and tax avoidance and the moderating impact of CSP to urge top management to increase sustainability efforts.

AB - This study addresses the influence of sustainable institutional investors (SII), based on the signatory status of the UN Principles for Responsible Investment (PRI), on corporate tax avoidance. Moreover, the moderating influence of corporate sustainability performance (CSP) is analyzed. The analyses concentrate on a European sample consisting of 1689 firm-year observations between 2014 and 2020 (EUROSTOXX 600) embedded in a stakeholder agency theoretical framework. Correlation, regression, and robustness analyses are conducted. The results are in line with prior studies on equity ownership and tax avoidance and indicate that SII have a negative impact on tax avoidance and that CSP strengthens this negative effect. These results are robust to a battery of sensitivity analyses. SII represent a major monitoring mechanism in promoting responsible tax behavior, which is in line with other stakeholders' interests. Tax avoidance should be integrated into overall sustainability management to realize an increased firm reputation. As the European Commission initiated several regulations on sustainable finance, sustainability reporting, and tax disclosure, the empirical results stress the interdependencies between ownership structure, CSP, and tax avoidance. The study makes a major contribution to prior analyses, as this study is the first to assess the link between SII and tax avoidance and the moderating impact of CSP to urge top management to increase sustainability efforts.

KW - corporate sustainability performance

KW - stakeholder agency theory

KW - sustainable corporate governance

KW - sustainable institutional investors

KW - tax avoidance

KW - Management studies

UR - http://www.scopus.com/inward/record.url?scp=85152054161&partnerID=8YFLogxK

UR - https://www.mendeley.com/catalogue/228b6462-fb04-3fc4-a3b7-0f1e72694d84/

U2 - 10.1002/csr.2492

DO - 10.1002/csr.2492

M3 - Journal articles

AN - SCOPUS:85152054161

VL - 30

SP - 2406

EP - 2418

JO - Corporate Social Responsibility and Environmental Management

JF - Corporate Social Responsibility and Environmental Management

SN - 1535-3958

IS - 5

ER -