2016-11-02T18:49:00

I investigate the influence of pretax earnings performance on the relation between corporate social responsibility (CSR) and tax avoidance. Prior studies of the relation between CSR and tax avoidance find mixed results. Based on slack resource theory (Penrose 1959), I predict and find that the relation between CSR and tax avoidance is moderated by earnings performance. The evidence shows that a lack of social responsibility is positively associated with tax avoidance in firms with low current or future earnings performance, but this effect is diminished when current or future earnings performance is high. There is some evidence that corporate social responsibility is positively associated with tax avoidance when current or future earnings performance is low but, again, the effect disappears when current or future earnings performance is high. Overall, my results suggest that attention to the demands of non-shareholder stakeholders is curtailed when firms face scarce resources.

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We employ states' enactment of constituency statutes as plausibly exogenous shocks to the marginal cost of corporate social responsibility (CSR) and examine the relation between CSRand corporate tax avoidance. We find almost no evidence of an association between the enactment of constituency statutes and tax avoidance. We use confidence intervals and other analysis to rule out low power as an explanation. Using an instrumental variables design, we find evidence that third-party CSR scores increase following constituency statutes, yet without a detectable impact on tax avoidance. The lack of results across multiple proxies and specifications suggests firms decouple CSR from tax policy. Our study introduces a strong identification strategy common in management research to the accounting literature, producing a novel noresult finding on a popular research question.

This study investigates the role of tax avoidance in the credit-rating process and whether differences exist in how rating agencies account for the risk relevance of tax avoidance. Using a sample of initial credit ratings assigned to public debt issuances during 1994-2013, our evidence is consistent with Moody's Investors Service and Standard & Poor's assessing the costs and benefits associated with tax avoidance differently from one another, resulting in more frequent and pronounced rating agency disagreement. Rating agency disagreement over tax avoidance is most evident when it is accompanied by relatively high levels of uncertain tax positions, foreign activities, research and development activities, or tax footnote opacity. We also find evidence that decreases (increases) in tax avoidance or tax footnote disclosure opacity are positively (negatively) associated with the convergence of split ratings. This suggests that firms can exacerbate or mitigate rating agency disagreement subsequent to bond issuance. Our study complements prior research by examining why sophisticated information intermediaries disagree about the risk relevance of tax avoidance. It also sheds light on how firms can influence rating agencies' understanding of tax avoidance.impôts dans les etats financiers est en relation positive (n egative) avec la convergence des diff erentes notes attribu ees, ce qui semble indiquer que les soci et es peuvent accentuer ou att enuer les divergences des agences de notation a la suite de l' emission d'instruments d'emprunt. L' etude vient compl eter les recherches pr ec edentes grâce a l'analyse des raisons pour lesquelles des agents chevronn es de transmission de l'information ne s'entendent pas quant a l'incidence de l' evitement fiscal sur l' evaluation du risque. Elle jette egalement un nouvel eclairage sur la mani ere dont les soci et es peuvent influencer la compr ehension de l' evitement fiscal qu'ont les agences de notation.