Environmental Performance, Financial Constraints, and Tax Avoidance Practices: Insights from FTSE All-Share Companies
Through its initiative known as the Climate Change Act (2008), the Government of the United Kingdom encourages corporations to enhance their environmental performance with the significant aim of reducing targeted greenhouse gas emissions by the year 2050. Previous research has predominantly assessed...
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MDPI AG
2025-01-01
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| Series: | Entropy |
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| Online Access: | https://www.mdpi.com/1099-4300/27/1/89 |
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| author | Probowo Erawan Sastroredjo Marcel Ausloos Polina Khrennikova |
| author_facet | Probowo Erawan Sastroredjo Marcel Ausloos Polina Khrennikova |
| author_sort | Probowo Erawan Sastroredjo |
| collection | DOAJ |
| description | Through its initiative known as the Climate Change Act (2008), the Government of the United Kingdom encourages corporations to enhance their environmental performance with the significant aim of reducing targeted greenhouse gas emissions by the year 2050. Previous research has predominantly assessed this encouragement favourably, suggesting that improved environmental performance bolsters governmental efforts to protect the environment and fosters commendable corporate governance practices among companies. Studies indicate that organisations exhibiting strong corporate social responsibility (CSR), environmental, social, and governance (ESG) criteria, or high levels of environmental performance often engage in lower occurrences of tax avoidance. However, our findings suggest that an increase in environmental performance may paradoxically lead to a rise in tax avoidance activities. Using a sample of 567 firms listed on the FTSE All Share from 2014 to 2022, our study finds that firms associated with higher environmental performance are more likely to avoid taxation. The study further documents that the effect is more pronounced for firms facing financial constraints. Entropy balancing, propensity score matching analysis, the instrumental variable method, and the Heckman test are employed in our study to address potential endogeneity concerns. Collectively, the findings of our study suggest that better environmental performance helps explain the variation in firms’ tax avoidance practices. |
| format | Article |
| id | doaj-art-08bfbdc3ebc44ca4b942471a770d593a |
| institution | Kabale University |
| issn | 1099-4300 |
| language | English |
| publishDate | 2025-01-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | Entropy |
| spelling | doaj-art-08bfbdc3ebc44ca4b942471a770d593a2025-01-24T13:31:58ZengMDPI AGEntropy1099-43002025-01-012718910.3390/e27010089Environmental Performance, Financial Constraints, and Tax Avoidance Practices: Insights from FTSE All-Share CompaniesProbowo Erawan Sastroredjo0Marcel Ausloos1Polina Khrennikova2School of Business, University of Leicester, Leicester LE2 1RQ, UKSchool of Business, University of Leicester, Leicester LE2 1RQ, UKSchool of Business, University of Leicester, Leicester LE2 1RQ, UKThrough its initiative known as the Climate Change Act (2008), the Government of the United Kingdom encourages corporations to enhance their environmental performance with the significant aim of reducing targeted greenhouse gas emissions by the year 2050. Previous research has predominantly assessed this encouragement favourably, suggesting that improved environmental performance bolsters governmental efforts to protect the environment and fosters commendable corporate governance practices among companies. Studies indicate that organisations exhibiting strong corporate social responsibility (CSR), environmental, social, and governance (ESG) criteria, or high levels of environmental performance often engage in lower occurrences of tax avoidance. However, our findings suggest that an increase in environmental performance may paradoxically lead to a rise in tax avoidance activities. Using a sample of 567 firms listed on the FTSE All Share from 2014 to 2022, our study finds that firms associated with higher environmental performance are more likely to avoid taxation. The study further documents that the effect is more pronounced for firms facing financial constraints. Entropy balancing, propensity score matching analysis, the instrumental variable method, and the Heckman test are employed in our study to address potential endogeneity concerns. Collectively, the findings of our study suggest that better environmental performance helps explain the variation in firms’ tax avoidance practices.https://www.mdpi.com/1099-4300/27/1/89environmental performanceenvironmental pillarcorporate governancecorporate social responsibilitytax avoidancefinancial constraints |
| spellingShingle | Probowo Erawan Sastroredjo Marcel Ausloos Polina Khrennikova Environmental Performance, Financial Constraints, and Tax Avoidance Practices: Insights from FTSE All-Share Companies Entropy environmental performance environmental pillar corporate governance corporate social responsibility tax avoidance financial constraints |
| title | Environmental Performance, Financial Constraints, and Tax Avoidance Practices: Insights from FTSE All-Share Companies |
| title_full | Environmental Performance, Financial Constraints, and Tax Avoidance Practices: Insights from FTSE All-Share Companies |
| title_fullStr | Environmental Performance, Financial Constraints, and Tax Avoidance Practices: Insights from FTSE All-Share Companies |
| title_full_unstemmed | Environmental Performance, Financial Constraints, and Tax Avoidance Practices: Insights from FTSE All-Share Companies |
| title_short | Environmental Performance, Financial Constraints, and Tax Avoidance Practices: Insights from FTSE All-Share Companies |
| title_sort | environmental performance financial constraints and tax avoidance practices insights from ftse all share companies |
| topic | environmental performance environmental pillar corporate governance corporate social responsibility tax avoidance financial constraints |
| url | https://www.mdpi.com/1099-4300/27/1/89 |
| work_keys_str_mv | AT probowoerawansastroredjo environmentalperformancefinancialconstraintsandtaxavoidancepracticesinsightsfromftseallsharecompanies AT marcelausloos environmentalperformancefinancialconstraintsandtaxavoidancepracticesinsightsfromftseallsharecompanies AT polinakhrennikova environmentalperformancefinancialconstraintsandtaxavoidancepracticesinsightsfromftseallsharecompanies |