Does corporate social responsibility affect tax avoidance: Evidence from family firms

Abstract

The purpose of this paper is to shed light on the effect of corporate social responsibility performance on tax avoidance. It also examines whether family ownership affects tax avoidance practices by socially responsible performance. Based on an international sample of 6,442 firm-year observations from 2006 to 2014, we use several panel-data regression models. We find that social and environmental performance is negatively related with tax avoidance so that firms with a greater socially responsible performance show a lower tax-saving practices. However, we find that this negative relation is lower in family-owned firms, what suggests that despite the fact that family firms show a greater socially responsible behavior aimed to preserve their socioemotional endowments, family ownership is positively associated with tax avoidance practices.

CSR permanency, family ownership, and firm value: Evidence from emerging economies

“…We consider a firm as family owned if members of the founding family own the percentage of equity up to 20% and being the largest shareholder of a firm. This classification is widely used in prior studies such as López‐González, Martínez‐Ferrero, and García‐Meca (2019), Briano‐Turrent and Poletti‐Hughes (2017), Ehrhardt and Nowak (2003), Campbell, Shrives, and Bohmbach‐Saager (2001), and Matthews and Fialko (2001).…”

“…Chan and Li (2008) argue that independent directors help firms to enhance its value. We measure leverage ratio ( LEV ) as natural logarithmic of book value of total debt divided by total assets (Aretz & Bartram, 2010; Berger & Ofek, 1995; López‐González et al, 2019). Berger and Ofek (1995) indicate the positive influence of leverage on value of firm.…”

Do income taxes affect corporate social responsibility? Evidence from European‐listed companies

“…Empirical research suggests competing predictions about the relationship between tax payments and CSR (Laguir, Staglianò, & Elbaz, 2015;Landry, Deslandes, & Fortin, 2013;Lin, Cheng, & Zhang, 2017). Some studies find a positive relationship (Huseynov & Klamm, 2012), whereas others (Davis et al, 2016;Lòpez-Gonzàlez et al, 2019) find results of opposite sign.…”

“…Theoretical and empirical literature mainly investigated the relationship between CSR and tax avoidance, finding interesting but ambiguous results (Davis, Guenther, Krull, & Williams, 2016;Goerke, 2018;Huseynov & Klamm, 2012). Recently, Lòpez-Gonzàlez, Martìnez-Ferrero, and Garcìa-Meca (2019) find that social and environmental performance is negatively related with tax This research did not receive any specific grant from funding agencies in the public, commercial, or not-for-profit sectors.…”

“…stress the reverse causal link. Endogeneity concerns are raised also in the literature on CSR and tax avoidance(Lòpez-Gonzàlez et al, 2019, Huseynov & Klamm, 2012. For our purpose, endogeneity could rise by both reverse causalities (EATR-CSR) and by the correlation between the independent variables and error term.…”