Beyond integrity systems: The role of board governance in shaping corporate tax avoidance in global oil and gas companies

Abstract

Corruption and tax avoidance remain persistent governance challenges in the global oil and gas industry, yet limited evidence explains whether integrity-based governance mechanisms or board-level governance capacity plays a more prominent role in shaping corporate tax behavior. This study examines the effect of anti-corruption practices on tax avoidance and investigates the moderating role of board characteristics. Using firm-year data from 100 large-cap oil and gas companies during 2021–2024, the study employs Partial Least Squares–Structural Equation Modeling using SmartPLS. Tax avoidance is measured using the Cash Effective Tax Rate (CETR), where lower values indicate greater avoidance. The results reveal that stronger anti-corruption practices significantly reduce tax avoidance, confirming the role of integrity systems in promoting corporate tax compliance. Board characteristics also significantly influence tax avoidance and strengthen the effectiveness of anti-corruption practices. More importantly, board governance capacity exhibits a stronger association with tax avoidance than anti-corruption practices alone, suggesting that effective boards not only monitor compliance but also shape strategic tax-related decisions. This finding indicates that governance quality depends not merely on the presence of formal integrity mechanisms but also on the board’s ability to translate such mechanisms into responsible corporate behavior.