ESG Performance and Tax Avoidance: The Case of the Jordanian Capital Market

Environmental, Social and Governance (ESG) disclosures are expected to play a pivotal role in introducing firms as transparent and responsible players on behalf of their societies and other interested groups through paying their shares of taxes. This study therefore examines the effect of ESG disclosures on tax avoidance practices on the Jordanian business environment using a panel data set which comprises 2,595 firm year observations of non-financial firms listed at the ASE between 2003 and 2022. The results of multiple regression analysis show a significant negative association between governance disclosures and tax avoidance, indicating that high-quality governance system leads to maximize the firms’ accounting practices and choices that are lead to pay more taxes which in turn leads to enhance services provided to the community they operate in. However, environmental and social disclosures are found to be insignificantly associated with tax avoidance practices. This study recommends that the Jordanian regulatory bodies must devote more efforts and adopt restricted regulations in order to restrict the probability of adopting tax avoidance techniques in order to provide more financial resources to build up the infrastructure and provide more efficient services to the community.