Navigating the Firm Value: The Interplay of Tax Avoidance and Sustainability Reporting .(Evidence from Egypt)

This study investigates the moderating role of sustainability (ESG) reporting in the relationship between tax avoidance and firm value, using evidence from Egypt. The research employs an empirical approach, utilizing secondary data from 2018 to 2023. Three hypotheses are formulated, and both pooled and Weighted Least Squares (WLS) panel data regression models are applied for analysis. The findings confirm the validity of two hypotheses: (1) the impact of sustainability reporting on firm value, and (2) the moderating effect of sustainability reporting on the relationship between tax avoidance and firm value. However, the hypothesis exploring the direct impact of tax avoidance on firm value is rejected.
Based on the findings, the study recommends that firms enhance their sustainability reporting practices by adopting transparent and evidence-based strategies. This would not only improve the perceptions of stakeholders but also minimize potential financial risks and increase trust. Specifically, businesses should focus on integrating sustainable practices into their corporate strategy, ensuring that tax planning aligns with long-term sustainability goals. By adopting ethical tax practices, firms can mitigate the potential negative effects of tax avoidance on their reputation and financial performance. Moreover, the study suggests that businesses should emphasize the importance of balancing tax obligations with sustainable development goals, as this approach could lead to improved firm value. Companies must effectively leverage their financial resources and apply appropriate financial strategies to optimize value creation while maintaining their commitment to sustainability.
For future research, it is recommended to explore how external factors—such as regulatory frameworks, evolving stakeholder expectations, and industry-specific dynamics—affect the interplay between tax avoidance, sustainability reporting, and firm value. Investigating the influence of these variables could offer a deeper understanding of the contextual factors that shape corporate practices. Additionally, future studies could focus on analyzing the long-term effects of sustainability strategies on firm value and conducting cross-country comparisons. Such research would provide valuable insights into how different cultural, institutional, and regulatory environments impact the relationship between tax avoidance and sustainability practices, offering a global perspective on these issues.