The Effect of ESG Performance on Aggressive Tax Planning in China: The Moderating Role of Internal Control

Yuxuan Zhang and Leihong Yuan

SAGE Open, 2025, vol. 15, issue 2, 21582440251341282

Abstract: This study investigates the influence of ESG performance on aggressive tax planning (ATP) among A-share listed firms in China and hopes to unravel the moderating role of internal control between ESG performance and ATP. It utilizes the panel data and regression analysis to explore the effect between ESG performance and ATP in China during 2017 to 2022. The study incorporates the Huazheng ESG Rating Index to validate the current ESG performance of Chinese-listed firms and assess the potential influence of internal control on the effect between ESG performance and ATP. The study uniquely presents evidence from the perspective of listed companies in the biggest emerging country, China, indicating that ESG performance is positively linked to ATP. Moreover, this connection is moderated by an internal control mechanism. These unique findings contribute to the limited but expanding literature emphasizing the necessity and enhancements of ESG performance and corporate behavior regarding ATP in the Chinese context. More specifically, non-state-owned enterprises are more pronounced on the positive correlation between ESG performance and ATP than state-owned enterprises. The research results offer essential insights for stakeholders in ESG and ATP and investors, regulators, and policymakers in China.

Keywords: ESG performance; aggressive tax planning; internal control; listed firms (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:sae:sagope:v:15:y:2025:i:2:p:21582440251341282

DOI: 10.1177/21582440251341282

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