Corporate Social Responsibility and Tax Management: The Moderating Effect of Beliefs about Corporate Tax Duty

Davis, Ann; Moore, Rebekah; Rupert, Timothy J

doi:10.2308/jata-2020-040

Cited by 6 publications

(7 citation statements)

References 59 publications

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“…Although it is perhaps unlikely to achieve such a low effective tax rate from relatively low‐risk and uncontroversial (i.e., proper) tax activities in real life, the choice to operationalize the method, rather than the level, of tax minimization is deliberate. This concession of realism to experimental control avoids potential confounds of different ETRs (and thus different income) across conditions (Davis et al 2021). In addition, if participants thought the proper condition more negative than intended or unrealistic, they would likely respond less to it, thus biasing against predicted results.…”

Section: Methodsmentioning

confidence: 99%

Who Gets to Play Dirty? Using Legitimacy Theory to Examine Investor Reactions to Differing Modes of Corporate Tax Minimization*

Gillette

Stinson

2022

Contemporary Accting Res

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This study examines how information about a corporation's tax minimization activities and primary operations jointly influence investor behavior. Prior research identifies fear of investor backlash as a primary curb on corporations' tax minimization. However, evidence for such reactions remains mixed. Drawing on the psychological framework of legitimacy theory, we predict and find that the interaction between operations-level validity and tax-level propriety influences investor behavior. For companies with lower perceived validity in their primary operations, perceived improper tax minimization elicits strong negative reactions from investors, while proper tax minimization partially compensates for a lack of validity. Conversely, companies with greater perceived operational validity are mostly insulated from negative reactions to tax strategies deemed improper. Thus, management concerns over the reputational risks of tax minimization may be misplaced in some contexts, as companies whose primary operations are more valued by society may be afforded more leeway in their tax strategies.

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Section: Methodsmentioning

confidence: 99%

Who Gets to Play Dirty? Using Legitimacy Theory to Examine Investor Reactions to Differing Modes of Corporate Tax Minimization*

Gillette

Stinson

2022

Contemporary Accting Res

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“…The authors conclude that non-environmentally sensitive firms need sustainability reporting to reduce the reputational costs that arise as a result of tax avoidance. Further, Davis et al (2022) characterize the relation between investor behavior and the interaction of corporate tax avoidance and CSR perceptions. In their experimental study, GAAP ETR is used as a proxy for tax avoidance and third-party ratings of labor and compensation as a proxy for CSR.…”

Section: Stakeholder Perceptionsmentioning

confidence: 99%

“…They find that less financially sophisticated investors reduce their perceptions of CSR when the firm's tax avoidance is high, whereas for more financially sophisticated investors, tax avoidance does not impact perceptions of CSR. Combined, the studies of Davis et al (2022) and Bazart et al (2020) indicate that the interaction between CSR and corporate tax influences investor perceptions in a complex manner that depends on other factors. Future research is needed to ascertain what mitigating factors may impact this relation, as well as how those factors interact with each other.…”

Section: Stakeholder Perceptionsmentioning

confidence: 99%

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Complements, substitutes or neither? A review of the relation between corporate social responsibility and corporate tax avoidance

Jemiolo

Farnsel

2023

JAL

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PurposeThis review analyzes the existing theoretical and empirical research on the relation between corporate taxation and corporate social responsibility (CSR). By synthesizing the current literature regarding the directional relation between tax avoidance and CSR, the authors are able to identify areas where further research on this relation should be targeted to maximize the public interest.Design/methodology/approachThe authors conduct a literature review of articles published in leading journals in the fields of accounting, finance and management. Reputable working papers are included to support emerging trends in the research and suggest meaningful paths forward.FindingsThe literature reveals a complex relation between corporate tax avoidance and CSR. The published research offers theoretical and empirical support for both a substitutive and a complementary directional relation. An actionable takeaway from this review is that corporate taxation must be considered jointly with CSR when seeking to maximize the public interest.Originality/valueThe authors find a rapid influx of research over the past decade that explores the complex directional relation between corporate tax avoidance and CSR. This review will be useful to researchers that are interested in moving beyond a directional characterization of this relation. By synthesizing both established and emerging literature, the authors provide a foundation and direction for future research to examine issues that may directly inform tax or firm policies to increase overall stakeholder welfare.

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“…On the other hand, corporate taxation policy can be viewed as a component of firms’ CSR operations; hence, firms with proactive CSR policies are less inclined to participate in aggressive tax procedures (Sikka, 2010). Therefore, what constitutes tax avoidance and whether it is considered a part of CSR has become an ongoing debatable issue (Dakhli, 2021; Davis et al , 2021; Whait et al , 2018). Nonetheless, investors and consumers progressively use CSR criteria, including business tax behaviour, to decide whether they invest funds or purchase a firm’s products (Davis et al , 2021).…”

Section: Introductionmentioning

confidence: 99%

Does CSR affect tax avoidance? Moderating role of political connections in Bangladesh banking sector

Rashid,

Begum,

Hossain

et al. 2023

SRJ

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Purpose This study aims to investigate whether socially responsible businesses with corporate social expenditure are less prone to engaging in tax avoidance. The study also examines whether political connections moderate the association between corporate social responsibility (CSR) and tax avoidance. Design/methodology/approach The study uses ordinary least squares to analyse the panel data of all 30 listed banks on the Dhaka Stock Exchange covering 2012 to 2020. The study uses a set of alternative variables to check the robustness of the findings. Findings Confirming the corporate culture theory, the study findings indicate that the higher the firms’ CSR expenditure, the lower the tax avoidance. Contrarily, the moderating effect of political connection weakens the role of CSR in tax avoidance, implying that political relation makes the firms socially irresponsible. Besides, the findings document that firms with strong political connections are more likely to be tax aggressive by weakening the role of CSR. The findings imply that firms with weaker political connections are more socially responsible than firms with strong political ties. Research limitations/implications The study provides the bank management and regulatory bodies valuable insights to take necessary actions so that they can easily monitor whether the banks follow their instructions regarding CSR and tax payments. As the politicians make the firm socially irresponsible, the regulatory bodies and bank management should not keep them or their relatives on the board. Originality/value The study contributes to the CSR and tax avoidance literature considering the moderating role of political connections in Bangladesh banking sector.

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Corporate Social Responsibility and Tax Management: The Moderating Effect of Beliefs about Corporate Tax Duty

Cited by 6 publications

References 59 publications

Who Gets to Play Dirty? Using Legitimacy Theory to Examine Investor Reactions to Differing Modes of Corporate Tax Minimization*

Who Gets to Play Dirty? Using Legitimacy Theory to Examine Investor Reactions to Differing Modes of Corporate Tax Minimization*

Complements, substitutes or neither? A review of the relation between corporate social responsibility and corporate tax avoidance

Does CSR affect tax avoidance? Moderating role of political connections in Bangladesh banking sector

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