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<p>This study investigates the impact of tax incentives on corporate Environmental, Social, and Governance (ESG) performance in Ghana’s manufacturing sector, addressing a critical gap in emerging market sustainability research. While governments worldwide implement tax incentives to encourage corporate sustainability, little empirical research explores their direct impact on ESG performance, particularly in developing economies. Using a two-way fixed effects model, this study analyzes panel data from 35 manufacturing firms (2008–2024) to examine the role of tax incentives, specifically income tax benefits and VAT incentives, in shaping corporate ESG commitments. Study indicates that tax incentives substantially improve ESG performance by alleviating financial pressures on enterprises and facilitating investments in sustainable projects. Nonetheless, tax incentives do not have uniform impacts, since variances arise based on business size, governance frameworks, and industry attributes. Financial restrictions partly buffer this link, since enterprises with more financial flexibility may more efficiently use tax advantages to enhance ESG results. The corporate environment influences this effect, with robust regulatory frameworks and stable financial markets enhancing the impact of tax incentives on sustainability commitments. This research enhances Stakeholder Theory, Resource Dependence Theory, and Competitive Strategy Theory by illustrating the impact of fiscal policies on business sustainability plans. It provides critical policy insights, highlighting the need for focused tax policies, financial sector changes, and enhancements to the business environment to optimise the efficacy of ESG-driven tax incentives. These results provide pragmatic direction for policymakers, corporate leaders, and investors in advancing sustainable business practices within Ghana’s manufacturing sector.</p>

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Do tax incentives drive ESG performance? evidence from Ghana’s manufacturing sector: the roles of financing constraints and institutional environment

  • 期刊论文

  • 发表日期：

    2026年6月30日

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  • Desmond Bayong,
  • Abdul-Aziz Dawdi,
  • Ibrahim Shaibu

摘要

This study investigates the impact of tax incentives on corporate Environmental, Social, and Governance (ESG) performance in Ghana’s manufacturing sector, addressing a critical gap in emerging market sustainability research. While governments worldwide implement tax incentives to encourage corporate sustainability, little empirical research explores their direct impact on ESG performance, particularly in developing economies. Using a two-way fixed effects model, this study analyzes panel data from 35 manufacturing firms (2008–2024) to examine the role of tax incentives, specifically income tax benefits and VAT incentives, in shaping corporate ESG commitments. Study indicates that tax incentives substantially improve ESG performance by alleviating financial pressures on enterprises and facilitating investments in sustainable projects. Nonetheless, tax incentives do not have uniform impacts, since variances arise based on business size, governance frameworks, and industry attributes. Financial restrictions partly buffer this link, since enterprises with more financial flexibility may more efficiently use tax advantages to enhance ESG results. The corporate environment influences this effect, with robust regulatory frameworks and stable financial markets enhancing the impact of tax incentives on sustainability commitments. This research enhances Stakeholder Theory, Resource Dependence Theory, and Competitive Strategy Theory by illustrating the impact of fiscal policies on business sustainability plans. It provides critical policy insights, highlighting the need for focused tax policies, financial sector changes, and enhancements to the business environment to optimise the efficacy of ESG-driven tax incentives. These results provide pragmatic direction for policymakers, corporate leaders, and investors in advancing sustainable business practices within Ghana’s manufacturing sector.