Research Question/Issue
This paper investigates the relationship between (a) corporate social responsibility (CSR) and earnings management (EM) and (b) examines whether corporate governance (CG) mechanisms can moderate the CSR–EM relation.
Research Methodology
Fixed‐effect regression model is used to estimate the coefficients of the variables.
Research Findings/Insight
We find a significant positive relation between CSR and EM. The result highlights the managerial opportunistic use of CSR explained within the agency theoretical framework. We also find that board size and block ownership significantly moderates the CSR–EM relationship.
Theoretical/Academic Implications
The paper contributes to the literature on CSR, EM, and CG. Specifically, it contributes to the extant literature by demonstrating why and how CG can significantly influence the CSR–EM nexus. Second, the paper provides some insight on the mixed findings of prior studies that have investigated the relationship between CSR and EM.
Practical/Policy Implication
The findings have significant implication for both policy makers, firm managers, and other stakeholders. Insights from the study will help develop and implement policies that will strengthen CG structures, especially in emerging markets to protect the interest of shareholders and improve market confidence.
This study examines whether multinational companies carry out tax avoidance through subsidiaries. An empirical analysis was conducted of 4,585 Korean firms from 2001 to 2010 by company and year. The results are as follows. First, MNCs that have become more internationally diversified through the establishment of overseas subsidiaries generally show a higher tendency to avoid tax. Thus, the analysis results show a positive correlation between globally diversified MNCs and corporate tax avoidance. This correlation is established due to the firms' active use of tax strategies (investment tax credits, tax cuts) applicable to the various countries in which they have expanded their businesses. Second, the analysis results showed that these firms actively avoided tax with overseas transfer pricing behaviors when compared to companies without overseas subsidiaries. Thus, the adjustment of sales prices and purchase value through actual transactions increased the propensity of the parent company to avoid tax.
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