ESG MODERATION OF TAX AVOIDANCE AND DISTRESS-RELATED FINANCIAL CONSTRAINTS IN INDONESIAN FIRM VALUATION

Jonathan Anggiat Pahotan (Universitas Indonesia)
Siti Nuryanah (Universitas Indonesia)

Multidiciplinary Output Research for Actual and International Issue (Morfai Journal)
Vol. 6 No. 6 (2026): Multidiciplinary Output Research For Actual and International Issue

Tax avoidance, financial vulnerability, and environmental, social, and governance (ESG) ratings may jointly inform firm valuation. This study examines their associations among nonfinancial Indonesian listed firms during 2019–2023. An unbalanced panel of 256 firm-years from 66 firms is estimated using firm and year fixed effects, firm-clustered standard errors, and restricted wild cluster bootstrap tests. Tax avoidance is measured by negative as-reported GAAP effective tax rates, and distress-related financial constraints (FC) by a modified accounting index excluding market equity. Greater constraints are associated with lower Tobin’s Q at mean ESG (coefficient −1.139; clustered p = 0.004; Holm-adjusted bootstrap p = 0.012). The primary tax hypothesis and both ESG moderation hypotheses are unsupported at 5%. A standardized-tax-field sensitivity produces a positive tax coefficient (p = 0.031), contrary to the negative prediction. FC inference varies with outlier processing; lagged regressors and a loss-inclusive companion model also yield nonsignificant estimates. Matched Refinitiv and Bloomberg models provide insufficient evidence of moderation. The contribution is measurement-specific Indonesian evidence on accounting vulnerability, tax-field comparability, and ESG-provider sensitivity. The estimates describe contemporaneous associations and do not identify causal financing effects.