Relationship between Corporate Sustainability Management and Sustainable Tax Strategies

Hee Young Ma,Sung Jong Park

doi:10.3390/su13137429

Abstract

This study analyzed the relationship between the environmental, social, and governance (ESG) assessment results of the Korea Corporate Governance Service, which evaluates the sustainability management levels of Korean companies and the variability in the five-year cash effective tax rates, a proxy for sustainable tax strategies. Corporate sustainability management allows the continuation of businesses that consider environmental protection, social contribution, and ethical management, as well as short-term financial performance. We expect these companies to prioritize sustainable tax strategies that ensure the long-term maintenance of the tax strategy results. Using a sample of firms listed in the Korean securities market during the 2011–2017 period, we adopted a two-way clustered regression model by a firm and year and established a research model with reference to previous studies and tax strategies. We found a significant negative association between excellent ESG ratings and the variability of cash effective tax rates, as well as between the implementation of ESG assessments and the variability of cash effective tax rates. This result indicates that companies with excellent corporate sustainability management strengthen their sustainable tax strategies and that companies become more interested in sustainable tax strategies after implementing ESG assessments. This study sheds light on the relationship between corporate sustainability management and sustainable tax strategies, helping improve our understanding of the impact of corporate sustainability management on sustainable tax strategies.

Highlights

Accepted: 26 June 2021Since the 2000s, “corporate sustainability management” has emerged as a key topic for companies worldwide
This study investigated the impact of corporate sustainability management on sustainable tax strategies
Our study investigated the impact of corporate sustainability management on sustainable tax strategies in Korea

Summary

Introduction

Accepted: 26 June 2021Since the 2000s, “corporate sustainability management” has emerged as a key topic for companies worldwide. Sustainability management refers to the pursuit of corporate sustainability by comprehensively reflecting the economic, environmental, and social responsibilities in the management activities of companies [1]. It is based on the perception that a company cannot survive in the long term if it only pursues short-term profits and fails to fulfill its environmental and social responsibilities. This study empirically analyzed whether a company’s sustainability management activities affect its sustainable tax strategy. Most of the research on the relationship between corporate sustainability management, or corporate social responsibility (Corporate social responsibility (CSR) can be defined as activities based on the return of profits to society and ethical and environmental responsibility, and Corporate sustainability management (CSM). If paying taxes is considered a fulfillment of social responsibility, it is more likely that companies that carry out Published: 2 July 2021

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