Corporate social responsibility and tax avoidance: the case of French companies

Abstract

Purpose The purpose of this paper is to shed light on the effect of tax avoidance on corporate social responsibility performance. It also investigates whether audit quality affects tax avoidance practices by socially responsible performance. Design/methodology/approach Based on a sample of French non-financial companies over the period 2005 to 2016, this paper uses panel data regressions. The authors apply generalized least square panel regression to overcome autocorrelation and heteroscedasticity problems. For further robustness, this paper runs instrumental variable regressions using the three-stage instrument variable method (three-stage least square). Findings The results show that firms with high CSR scores are more likely to engage in aggressive tax avoidance. The findings also show that firms audited by high-quality auditors are more likely to get involved in CSR for hedging against the potential consequences of aggressive tax avoidance practices. Research limitations/implications The findings are consistent with risk management theory, which suggests that firm’s hedge against any reputational risks that might arise from avoiding taxes by engaging more in CSR. Practical implications Results have implications for policymakers in that CSR firms audited by high-quality auditors may engage in CSR to overcome any negative reactions that could be caused as a result of tax avoidance. Thus, they need to be cautious about managers’ opportunistic behavior and enhance monitoring to enforce social compliance and to be tax compliant. Originality/value This paper extends the existing literature by examining the effect of audit quality on the relationship between CSR performance and corporate tax avoidance. Audit quality is deemed to be an important governance feature that is likely to constraint managerial opportunistic behaviors. Audit quality, along with CSR performance, are associated with a higher level of tax avoidance.

Do women on corporate boardrooms have an impact on tax avoidance? The mediating role of corporate social responsibility

“…On the other side, CSR has been shown to affect negatively corporate tax avoidance activities (Davis et al , 2016; Mouakhar et al , 2020; Kovermann and Velte, 2021; Abid and Dammak, 2021). It is considered that more socially responsible firms need to convey transparency, integrity and a good reputation (Lanis and Richardson, 2012; Muller and Kolk, 2015).…”

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

“…On the other hand, in line with this risk management view of CSR, many studies found that CSR and tax avoidance are positively linked (Abdelfattah and Aboud, 2020;Abid and Dammak, 2022;Alsaadi, 2020;L opez-Gonz alez et al, 2019). Alsaadi (2020) discovered that corporations contribute to CSR to mask their socially irresponsible behaviours of aggressive tax dodging.…”

Corporate social responsibility and tax avoidance: Channeling effect of family firms

“…Many studies have examined the relationship between CSR and tax avoidance across different countries. While some studies support corporate culture theory (Richardson and Lanis, 2011; Lanis and Richardson, 2012/2015; Hoi et al., 2013; Jones et al., 2017; Karthikeyan and Jain, 2017; Gulzar et al., 2018; Lee, 2020), others support risk management theory (Zeng, 2016; Marsdenia and Martani, 2018; Col and Patel, 2019; Mao, 2019; Abdelfattah and Aboud, 2020; Abid and Dammak, 2021; Jiang et. al., 2022; Khan et.…”