The Link Effect of ESG Score, Stock Price Volatility, and Tax Payment: Doing Well while Doing Good

This study aims to identify how environmental, social and governance (ESG) performance influences stock price volatility, explicitly focusing on the moderating role of tax engagement. ESG performance is measured by an ESG Score calculated from the weighting of three dimensions: environmental, social and governance. Stock price volatility is measured by the degree of price variations over 12 months based on the last 52 weeks’ prices. A sample of Indonesia-listed firms is used, with 770 observations from 2023. The results show that the ESG Score negatively impacts stock price volatility, which is more significant in the social dimension than in the environmental and governance dimensions. In addition, the tax payment variable moderates the relationship and increases the effect of the ESG Score on stock price volatility. These findings suggest that ESG practices and tax transparency are ethical elements and critical components for financial stability, promoting the high-quality development of listed firms. This study is significant for firms, regulators, policymakers and investors. Overall, it underrates the importance of firms adopting ESG activities and engaging in tax management to mitigate risks and maintain viability in the contemporary business environment. This study provides new empirical evidence regarding the factors driving corporate stock price volatility. In addition, it offers pertinent policy recommendations for businesses and governments regarding the significance of ESG investments.