The Role of Largest Ownership Structure in ESG Reporting, Tax Avoidance, and Firm Value: Evidence from Emerging Markets

Dianwicaksih Arieftiara; Shinta Widyastuti; Masripah Masripah; Munasiron Miftah; Suparna Wijaya

doi:10.48161/qaj.v5n2a1682

Authors

Dianwicaksih Arieftiara Department of Accounting, Faculty of Economics and Business, Universitas Pembangunan Nasional Veteran Jakarta, 12450, Indonesia.
Shinta Widyastuti Department of Accounting, Faculty of Economics and Business, Universitas Pembangunan Nasional Veteran Jakarta, 12450, Indonesia.
Masripah Department of Accounting, Faculty of Economics and Business, Universitas Pembangunan Nasional Veteran Jakarta, 12450, Indonesia.
Munasiron Miftah Department of Accounting, Faculty of Economics and Business, Universitas Pembangunan Nasional Veteran Jakarta, 12450, Indonesia.
Suparna Wijaya Department of Accounting, Faculty of Economics and Business, Universitas Pembangunan Nasional Veteran Jakarta, 12450, Indonesia.

DOI:

https://doi.org/10.48161/qaj.v5n2a1682

Abstract

The level of concern among business entities regarding sustainability issues in emerging markets remains minimal, particularly in Indonesia and Malaysia. The intention to fulfill the requirement is contingent upon the owner's intention, as ESG reporting is a non-financial information that is naturally considered a business ethic. Consequently, this study investigates the influence of ownership structure on Environmental, Social, and Governance (ESG) reporting, tax avoidance, and firm value. This study expands to investigate the impact of ESG reporting on tax avoidance and firm value in Indonesia and Malaysia, as sustainability initiatives could potentially be used as a strategy for tax avoidance. We find the largest ownership structure and check to see if all of its members add to the value of the company. This lets us figure out how much these large shareholders affect the company's tax and sustainability plans. We focus on all non-financial sector companies that have published ESG Reporting in Indonesia and Malaysia from 2012 to 2023. We apply moderated panel regressions to test our hypotheses. Our findings reveal that the largest ownership in Indonesia negatively influences ESG reporting but positively affects tax avoidance, while the largest ownership in Malaysia has no significant effect on ESG disclosure or tax avoidance. The supervision of the largest owner of ESG reporting significantly affects tax avoidance in both countries. The supervision of the largest ownership structure in ESG reporting also has a significant impact on firm value. Meanwhile, the supervision of the largest owner of tax avoidance does not impact firm value. This is the first study to investigate at how the largest ownership structure of companies in both countries oversee the creation of sustainability programs that meet the requirements for sustainability reporting while also being used as tax strategies and increase the value of the company.

Downloads

Download data is not yet available.

References

Krueger, P., Sautner, Z., Tang, D. Y., & Zhong, R. (2024). The Effects of Mandatory ESG Disclosure Around the World. Journal of Accounting Research. 62(5), 1795-1847.

Liang, H., & Renneboog, L. (2017). On the Foundations of Corporate Social Responsibility. Journal of Finance, 72(2), 853–910.

Wu, S., Li, X., Du, X., & Li, Z. (2022). The Impact of ESG Performance on Firm Value: The Moderating Role of Ownership Structure. Sustainability (Switzerland), 14(21), 1–22.

Jiang, H., Hu, W., & Jiang, P. (2024). Does ESG performance affect corporate tax avoidance? Evidence from China. Finance Research Letters, 61 (March 2024), 105056, 1-11

Lanis, R., & Richardson, G. (2015). Is Corporate Social Responsibility Performance Associated with Tax Avoidance? Journal of Business Ethics, 127(2), 419–457.

Marquis, C., Toffel, M. W., & Zhou, Y. (2016). Scrutiny, norms, and selective disclosure: A global study of greenwashing. Organization Science, 27(2), 483–504.

Arieftiara, D., Utama, S., Wardhani, R., & Rahayu, N. (2020). Contingent fit between business strategies and environmental uncertainty: The impact on corporate tax avoidance in Indonesia. Meditari Accountancy Research, 28(1), 139–167.

Broadstock, D. C., Chan, K., Cheng, L. T. W., & Wang, X. (2021). The role of ESG performance during times of financial crisis: Evidence from COVID-19 in China. Finance Research Letters, 38(August 2020), 101716, 1-11.

Abubakr, A. A. M., Khan, F., Mohammed, A. A. A., Abdalla, Y. A., Mohammed, A. A. A., & Ahmad, Z. (2024). Impact of AI applications on corporate financial reporting quality: Evidence from UAE corporations. Qubahan Academic Journal, 4(3), 782-792.

Alazzani, A., Hassanein, A., & Aljanadi, Y. (2017). Impact of gender diversity on social and environmental performance: evidence from Malaysia. Corporate Governance (Bingley), 17(2), 266–283.

Ali, H., Adegbite, E., & Nguyen, T. H. (2022). Ownership structure and political spending disclosure. Accounting Forum, 46(2), 160–190.

Tang, Z., Hull, C. E., & Rothenberg, S. (2012). How corporate social responsibility engagement strategy moderates the CSR–financial performance relationship. Journal of Management Studies, 49(7), 1274–1303.

Bae, S. M., Masud, M. A. K., & Kim, J. D. (2018). A cross-country investigation of corporate governance and corporate sustainability disclosure: A signaling theory perspective. Sustainability, 10(8), 2611, 1-16.

Ogundajo, G. O., Akintoye, R. I., Abiola, O., Ajibade, A., Olayinka, M. I., & Akintola, A. (2022). Influence of country governance factors and national culture on corporate sustainability practice: An inter-country study. Cogent Business & Management, 9(1), 2130149, 1-23.

Jiang, Y., Zheng, H., & Wang, R. (2021). The effect of institutional ownership on listed companies’ tax avoidance strategies. Applied Economics, 53(8), 880–896.

Zhang, Y., Yuan, L., Ibrahim, I., Li, J., & Du, M. (2025). Sustainability in question: Climate risk, environment, social and governance performance, and tax avoidance. Sustainability, 17(4), 1400, 1-21.

OECD. (2024). Revenue Statistics in Asia and the Pacific 2023 ─ Indonesia Tax-to-GDP ratio Tax structures Personal income tax Social security contributions Value added taxes / Goods and services tax Other taxes on goods and services. Publisher: OECD.

Uliarta, Y. (2024). Indonesia’s tax reforms risk being undermined by reckless spending. The East Asia Forum.

Winarsih, W., Machmuddah, Z., & Febrianto, M. R. (2025). Does the disclosure of the company's environment, social, governance score affect sustainable growth rate that is reinforced by a collectivist culture? Contaduría y Administración, 70(1), Article e5366. 77-97.

Asmoro, P. S., Ramakrishnan, S., Arsyanda, S., Alfandia, N. S., Ningsih, D. N. C., & Rokhimakhumullah, D. N. F. (2024). ESG disclosure, governance, political connection, and tax aggressiveness: What information is critical, and is more information always forceful? Cogent Business & Management, 11(1), 2415600, 1-21.

Whelan, T., Atz, U., Van Holt, T., & Clark, C. (2021). ESG and financial performance: Uncovering the relationship by aggregating evidence from 1,000 plus studies published between 2015–2020. Publisher: NYU Stern Center for Sustainable Business.

Dincă, M. S., Vezeteu, C.-D., & Dincă, D. (2022). The relationship between ESG and firm value: Case study of the automotive industry. Frontiers in Environmental Science, 10, 1059906, 1-10

Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305–360.

Freeman, R. E. (1984). Strategic management: A stakeholder approach. Pitman Publishing.

Watts, R. L., & Zimmerman, J. L. (1986). Positive accounting theory. Prentice-Hall.

Shleifer, A., & Vishny, R. W. (1997). A survey of corporate governance Andrei. The Journal of Finance, 52(2), 737–783.

Chen, S., Chen, X., Cheng, Q., & Shevlin, T. (2010). Are family firms more tax aggressive than non-family firms? Journal of Financial Economics, 95(1), 41–61.

Campopiano, G., & De Massis, A. (2015). Corporate social responsibility reporting: a content analysis in family and non-family firms. Journal of Business Ethics, 129(3), 511–534.

Pratama, A., Jaenudin, E., & Anas, S. (2022). Environmental, Social, Governance-Sustainability Disclosure Using International Financial Reporting Sustainability Standards S1 in Southeast Asian Companies: A Preliminary Assessment. International Journal of Energy Economics and Policy, 12(6), 456–472.

Qian, T., & Yang, C. (2023). State-Owned Equity Participation and Corporations’ ESG Performance in China: The Mediating Role of Top Management Incentives. Sustainability (Switzerland), 15(15), 1-21.

Hanlon, M., & Heitzman, S. (2010). A review of tax research. Journal of Accounting and Economics, 50(2–3), 127–178.

Sun, J., Pellegrini, M. M., Dabić, M., Wang, K., & Wang, C. (2024). Family ownership and control as drivers for environmental, social, and governance in family firms. Review of Managerial Science, 18(4), 1015-1046.

Espinosa-Méndez, C., Maquieira, C., & Arias, J. T. (2024). ESG performance on the value of family firms: international evidence during Covid-19. Humanities and Social Sciences Communications, 11(1), 1–9.

Khurana, I. K., & Moser, W. J. (2013). Institutional shareholders’ investment horizons and tax avoidance. Journal of the American Taxation Association, 35(1), 111–134.

Wei, L., & Chengshu, W. (2024). Company ESG performance and institutional investor ownership preferences. Business Ethics, the Environment & Responsibility, 33(3), 287-307.

Atan, R., Alam, M. M., Said, J., & Zamri, M. (2018). The impacts of environmental, social, and governance factors on firm performance. Management of Environmental Quality: An International Journal, 29(2), 182–194.

Eisenhardt, K. M. (1989). Agency theory: An assessment and review. Academy of Management Review, 14(1), 57–74.

Gómez-Mejía, L. R., Haynes, K. T., Núñez-Nickel, M., Jacobson, K. J. L., & Moyano-Fuentes, J. (2007). Socioemotional wealth and business risks in family-controlled firms: Evidence from Spanish olive oil mills. Administrative Science Quarterly, 52(1), 106–137.

Hsu, P.-H., Liang, H., & Matos, P. (2018). Leviathan Inc. and Corporate Environmental Engagement. ECGI, March, 94–108.

Armstrong, C. S., Blouin, J. L., Jagolinzer, A. D., & Larcker, D. F. (2015). Corporate governance, incentives, and tax avoidance. Journal of Accounting and Economics, 60(1), 1–17.

Rees, W., & Rodionova, T. (2015). The influence of family ownership on corporate social responsibility: An international analysis of publicly listed companies. Corporate Governance: An International Review, 23(3), 184–202.

Setiawan, D., Aryani, A., Yuniarti, S., & Brahmana, R. K. (2019). Does ownership structure affect dividend decisions? Evidence from Indonesia’s banking industry. International Journal of Business, 24(3), 329–341.

Waagstein, P. R. (2011). The Mandatory Corporate Social Responsibility in Indonesia: Problems and Implications. Journal of Business Ethics, 98(3), 455–466.

Siregar, S. V., & Bachtiar, Y. (2010). Corporate social reporting: empirical evidence from Indonesia Stock Exchange. International Journal of Islamic and Middle Eastern Finance and Management, 3(3), 241–252.

Badertscher, B. A., Katz, S. P., & Rego, S. O. (2013). The separation of ownership and control and corporate tax avoidance. Journal of Accounting and Economics, 56(2–3), 228–250.

Amran, A., Ooi, S. K., & Mydin, R. T. (2018). Use of the web in corporate sustainability disclosure : Malaysian evidence. World Review of Entrepreneurship, Management and Sustainable Development, 14(5), 619–636.

Lui, T. K., & Zainuldin, M. H. (2024). From boardroom to sustainability reporting: stakeholder-RBV insights into ESG disclosures among Malaysian banks. Bottom Line. 37(4), 1-27.

Bakar, A. B. S. A., Ghazali, N. A. B. M., & Ahmad, M. B. (2019). Sustainability reporting and board diversity in Malaysia. International Journal of Academic Research in Business and Social Sciences, 9(3), 1044–1067.

Waldau, R. (2024). A systematic literature review on determinants and outcomes of ESG performance in family firms. Management Review Quarterly. 9(1). 1-57

Shafie, N. A., Sanusi, Z. M., Johari, R. J., Utami, W., & Ghazali, A. W. (2018). Effects of Organisational Structure on Social Value: Mediating Role of Financial Performance. Management & Accounting Review, 17(3), 131–157.

Taylor, G., & Richardson, G. (2014). Incentives for corporate tax planning and reporting: Empirical evidence from Australia. Journal of Contemporary Accounting and Economics, 10(1), 1–15.

Sudibyo, Y. A., & Jianfu, S. (2016). Political connections, state owned enterprises and tax avoidance: An evidence from Indonesia. Corporate Ownership and Control, 13(3continued2), 279–283.

Dyck, A., Volchkova, N., & Zingales, L. (2008). The corporate governance role of the media: Evidence from Russia. The Journal of Finance, 63(3), 1093–1135.

Prado-Lorenzo, J. M., Gallego-Alvarez, I., & Garcia-Sanchez, I. M. (2009). Stakeholder engagement and corporate social responsibility reporting: The ownership structure effect. Corporate Social Responsibility and Environmental Management, 16(2), 94–107.

Fuadah, L. L., Mukhtaruddin, M., Andriana, I., & Arisman, A. (2022). The ownership structure, and the Environmental, Social, And Governance (ESG) disclosure, firm value and firm performance: the audit committee as moderating variable. Economies, 10(314), 1-16.

Bradshaw, M., Liao, G., & Ma, M. (Shuai). (2018). Agency Costs and Tax Planning when the Government is a Major Shareholder. Group, 23529(2), 1–45.

Salihu, I. A., Annuar, H. A., & Sheikh Obid, S. N. (2015). Foreign investors’ interests and corporate tax avoidance: Evidence from an emerging economy. Journal of Contemporary Accounting and Economics, 11(2), 138–147.

Wahab, N. S. A. (2012). Tax planning, corporate governance and equity value. British Accounting Review, 44(2), 111–124.

Annuar, H. A., Salihu, I. A., & Obid, S. N. S. (2014). Corporate ownership, governance and tax avoidance: an interactive effects. Procedia - Social and Behavioral Sciences, 164(August), 150–160.

Suchman, M. C. (1995). Managing legitimacy: strategic and approaches. Academy of Management Review, 20(3), 571–610.

Alkurdi, A., & Mardini, G. H. (2020). The impact of ownership structure and the board of directors’ composition on tax avoidance strategies: empirical evidence from Jordan. Journal of Financial Reporting and Accounting, 18(4), 795–812.

Arvidsson, S., & Dumay, J. (2022). Corporate ESG reporting quantity, quality and performance: Where to now for environmental policy and practice? Business Strategy and the Environment, 31(3), 1091–1110.

Gaaya, S., Lakhal, N., & Lakhal, F. (2017). Does family ownership reduce corporate tax avoidance? The moderating effect of audit quality. Managerial Auditing Journal, 32(7), 731–744.

Chan, K. H., Mo, P. L. L., & Tang, T. (2016). Tax avoidance and tunneling: Empirical analysis from an agency perspective. Journal of International Accounting Research, 15(3), 49-66.

Qureshi, M. A., Kirkerud, S., Theresa, K., & Ahsan, T. (2020). The impact of sustainability (environmental, social, and governance) disclosure and board diversity on firm value: The moderating role of industry sensitivity. Business Strategy and the Environment, 29(3), 1199–1214.

Huang, W. (2024). Female board representation and firm value: International evidence. Finance Research Letters, 68(August), 105998, 1-8.

Inger, K. K. (2014). Relative valuation of alternative methods of tax avoidance. Journal of the American Taxation Association, 36(1), 27–55.

Khuong, N. V., Liem, N. T., Thu, P. A., & Khanh, T. H. T. (2020). Does corporate tax avoidance explain firm performance? Evidence from an emerging economy. Cogent Business and Management, 7(1). 1-17.

Liesen, A., Figge, F., Hoepner, A., & Patten, D. M. (2017). Climate Change and Asset Prices: Are Corporate Carbon Disclosure and Performance Priced Appropriately? Journal of Business Finance and Accounting, 44(1–2), 35–62.

Hossain, M. M., Alam, M., Hecimovic, A., Alamgir Hossain, M., & Choudhury Lema, A. (2016). Contributing barriers to corporate social and environmental responsibility practices in a developing country: A stakeholder perspective. Sustainability Accounting, Management and Policy Journal, 7(2), 319–346.

Dam, L., & Scholtens, B. (2012). Does ownership type matter for corporate social responsibility? Corporate Governance: An International Review, 20(3), 233–252.

[7Desai, M. A., & Dharmapala, D. (2006). Corporate tax avoidance and high-powered incentives. Journal of Financial Economics, 79(1), 145–179.

Arayssi, M., Jizi, M., & Tabaja, H. H. (2020). The impact of board composition on the level of ESG disclosures in GCC countries. Sustainability Accounting, Management and Policy Journal, 11(1), 137–161.

Sacristán-Navarro, M., Gómez-Ansón, S., & Cabeza-García, L. (2011). Family ownership and control, the presence of other large shareholders, and firm performance: Further evidence. Family Business Review, 24(1), 71–93.

Cordeiro, J. J., Profumo, G., & Tutore, I. (2021). Family ownership and stockholder reactions to environmental performance disclosure: A test of secondary agency relationships. Business Strategy and the Environment, 30(4), 2091–2107.

Voon, K. J. S., Lee, K. Y. M., Nik Abdullah, N. H., & Yi, S. (2024). ESG disclosure and tax avoidance: evidence from Malaysia. International Journal of Academic Research in Accounting, Finance and Management Sciences, 14(3), 242–252.

Lin, K. Z., Cheng, S., & Zhang, F. (2017). Corporate Social Responsibility, Institutional Environments, and Tax Avoidance: Evidence from a Subnational Comparison in China. International Journal of Accounting, 52(4), 303–318.

Seok, J., Kim, Y., & Oh, Y. K. (2024). How ESG shapes firm value: The mediating role of customer satisfaction. Technological Forecasting and Social Change, 208(February), 123714, 1-12.

Li, Y., Gong, M., Zhang, X. Y., & Koh, L. (2018). The impact of environmental, social, and governance disclosure on firm value: The role of CEO power. British Accounting Review, 50(1), 60–75.

Singh, S. K., Del Giudice, M., Chiappetta Jabbour, C. J., Latan, H., & Sohal, A. S. (2022). Stakeholder pressure, green innovation, and performance in small and medium-sized enterprises: The role of green dynamic capabilities. Business Strategy and the Environment, 31(1), 500–514.

Koundouri, P., Pittis, N., & Plataniotis, A. (2022). The impact of ESG performance on the financial performance of european area companies: an empirical examination. Environmental Sciences Proceedings. 15(13), 1-11.

Duque-Grisales, E., & Aguilera-Caracuel, J. (2021). Environmental, Social and Governance (ESG) scores and financial performance of multilatinas: moderating effects of geographic international diversification and financial slack. Journal of Business Ethics, 168(2), 315–334.

Derwall, J., Guenster, N., Bauer, R., & Koedijk, K. (2005). The premium puzzle. Journal of Financial Analysts, 61(2), 51–63.

Eccles, R. G., Ioannou, I., & Serafeim, G. (2014). The impact of corporate sustainability on organizational processes and performance. Management Science, 60(11), 2835–2857.

Bauer, R., Guenster, N., & Otten, R. (2004). Empirical evidence on corporate governance in Europe : The effect on stock ret ... Journal of Asset Management, 5(2004), 91–104.

Bebchuk, L., Cohen, A., & Ferrell, A. (2009). What matters in corporate governance. Review of Financial Studies, 22(2), 783–827.

Siagian, F., Siregar, S. V., & Rahadian, Y. (2013). Corporate governance, reporting quality, and firm value: evidence from Indonesia. Journal of Accounting in Emerging Economies, 3(1), 4–20.

Tan, W., Cai, Y., Luo, H., Zhou, M., & Shen, M. (2024). ESG, technological innovation and firm value: evidence from china. International Review of Financial Analysis, 96(A), 1-20

Al-Najjar, B., & Anfimiadou, A. (2012). Environmental policies and firm value. Business Strategy and the Environment, 21(1), 49–59.

Fatemi, A. M., & Fooladi, I. J. (2013). Sustainable finance: A new paradigm. Global Finance Journal, 24(2), 101–113.

El Ghoul, S., Guedhami, O., & Kim, Y. (2017). Country-level institutions, firm value, and the role of corporate social responsibility initiatives. Journal of International Business Studies, 48(3), 360–385.

Chen, S., Song, Y., & Gao, P. (2023). Environmental, social, and governance (ESG) performance and financial outcomes: Analyzing the impact of ESG on financial performance. Journal of Environmental Management, 435(1). 1-18

Yoon, S., Xin, J., & Cui, Y. (2024). Effects of agency costs on the relationship between tax avoidance and firm value: A case of Chinese companies. Journal of Social Economics Research, 11(1), 12–22.

Khaoula, F., & Moez, D. (2019). The moderating effect of the board of directors on firm value and tax planning: Evidence from European listed firms. Borsa Istanbul Review, 19(4), 331–343.

Gribnau, H. (2015). Corporate social responsibility and tax planning: not by rules alone. Social and Legal Studies, 24(2), 225–250.

DiMaggio, P. J., & Powel, W. W. (1983). The iron cage revisited: institutional isomorphism and collective rationality in organizational fields. American Sociological Review, 48(2), 147–160.

Fama, E. F., & French, K. R. (1992). The cross‐section of expected stock returns. The Journal of Finance, 47(2), 427–465.

Piotroski, J. D. (2000). Value Investing: The Use of Historical Financial Statement Information to Separate Winners from Losers. Journal of Accounting Research, 38, 1–41.

Porta, R. La, Lopez-de-Silanes, F., Shleifer, A., & Vishny, R. (2000). Investor protection and corporate governance. Journal of Financial Economics, 58(1–2), 3–27.