Tax planning, ESG disclosure, and firm value: Does ESG act as a reputational buffer? Evidence from consumer goods firms

Febi Tessalonika Putri Sihombing; Suparna Wijaya

doi:10.54957/akuntansiku.v5i3.2402

Authors

Febi Tessalonika Putri Sihombing Universitas Pembangunan Nasional Veteran Jakarta
Suparna Wijaya Universitas Pembangunan Nasional Veteran Jakarta

DOI:

https://doi.org/10.54957/akuntansiku.v5i3.2402

Keywords:

ESG disclosure, Firm value, Reputation, Tax planning

Abstract

This study examines the effect of tax planning on firm value, viewed as the market's assessment of reputational capital, and the moderating role of Environmental, Social, and Governance (ESG) disclosure. Two competing predictions are tested: ESG disclosure acts as a reputational buffer that mitigates market penalties for tax planning, or it amplifies those penalties by signalling inconsistency. The sample comprises 10 branded consumer goods manufacturers listed on the Indonesia Stock Exchange over 2022–2024 (30 firm-year observations). Tax planning is measured by the Cash Effective Tax Rate (CETR), ESG disclosure by a GRI Standards-based disclosure index, and firm value by the natural logarithm of Tobin's Q. Moderated regression with mean-centred variables and firm-clustered standard errors is employed. The results show that CETR is positively associated with firm value, implying that firms with more intensive tax planning tend to be valued lower; however, this association is significant only at the 10% level and is not robust to firm fixed effects. ESG disclosure has no direct effect and does not moderate the relationship, so neither the buffer nor the amplifier hypothesis is supported. The findings suggest that the market does not yet use the breadth of ESG disclosure to assess corporate tax behaviour, underscoring the need for explicit tax transparency.

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