Is Corporate Social Responsibility Related to Corporate Tax Avoidance? Evidence from a Natural Experiment

Mayberry, Michael; Watson, Luke

doi:10.2308/jata-19-021

Cited by 22 publications

(13 citation statements)

References 98 publications

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“…Other studies examine the corporate tax implications of CSR mandates. Mayberry and Watson (2021) exploit state-level constituency statutes that allow firms to consider the interests of broad stakeholder groups as exogenous variation in firms' CSR activities and examine corporate tax implications. They find no evidence of an association between the enactment of state-level constituency statutes and corporate tax avoidance, suggesting that firms decouple CSR and tax policy.…”

Section: Consequencesmentioning

confidence: 99%

Consequences of CSR reporting regulations worldwide: a review and research agenda

Haji

Coram

Troshani

2022

AAAJ

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PurposeThis study reviews research that examines economic and behavioural consequences of CSR reporting regulations. Specifically, the authors evaluate the impact of CSR reporting regulations on (1) reporting quality, (2) capital-markets and (3) firm behaviour.Design/methodology/approachThe authors first describe the stated objectives and enforcement level of CSR reporting regulations around the world. Second, the authors review over 130 archival studies in accounting, finance, economics, law and management that examine consequences of the regulations.FindingsThe stated objectives and enforcement of CSR reporting regulations vary considerably across countries. Empirical research finds no significant changes in reporting quality and generally concludes that CSR reporting continues to be ceremonial rather than substantive after the regulations – consistent with corporate legitimation and “greenwashing” views. In contrast, growing evidence shows both positive and negative capital-market and real effects of the regulations. Overall, the findings from this review indicate that, on balance, there remains a significant number of questions on the net effects of CSR reporting regulations.Originality/valueThe authors offer a comprehensive review of the literature examining consequences of CSR reporting regulations. The authors identify apparent tensions in studies assessing different outcomes after the regulations: between symbolic reporting and positive capital-market outcomes; between profitability and CSR; and between CSR and the welfare of non-shareholder groups. Additionally, we highlight differences in the scope and stated objectives of CSR regulations across countries, with the regulations often reflecting socio-economic development and national interests of implementing countries. Collectively, our review indicates that institutional details are crucial when considering the design or consequences of CSR reporting regulations and/or standards.

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Section: Consequencesmentioning

confidence: 99%

Consequences of CSR reporting regulations worldwide: a review and research agenda

Haji

Coram

Troshani

2022

AAAJ

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“…As a result, firms with better CSR performance can bear the negative sanction associated with undertaking aggressive tax avoidance (Hoi et al ., 2013), giving rise to a negative relation between CSR and ETRs. Third, the decoupling view suggests that firms do not link CSR with tax policies, resulting in no relation (Mayberry and Watson, 2021).…”

Section: Esg/csr and Firm Valuementioning

confidence: 99%

“…Finally, the conflicting results can be due to CSR and ETRs are both being endogenously determined, and the two studies do not utilize any exogenous changes in CSR for identification. To address this concern, Mayberry and Watson (2021) use the enactment of constituency statutes as an exogenous shock to CSR engagement and find no significant impacts of CSR on the cash ETR. Overall, how CSR engagement affects firms’ ETRs is still under debate, although the test based on a natural experiment suggests no relation (Mayberry and Watson, 2021).…”

Section: Esg/csr and Firm Valuementioning

confidence: 99%

Sustainable Finance: ESG/CSR, Firm Value, and Investment Returns*

Chang

Jin

et al. 2022

Asia-Pac J of Fin Stud

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We review the burgeoning sustainable finance literature, emphasizing the value implications of ESG (environmental, social, and governance) and CSR (corporate social responsibility) practices. We use a discounted cash flow valuation framework to identify value drivers through which such practices can enhance firm value. Collectively, empirical evidence supports that they increase firm value by motivating employees, strengthening customer-supplier relationships, boosting long-term growth, increasing dividends, and reducing financing costs. Furthermore, more socially responsible firms deliver no higher excess stock returns in the long run. Green bonds neither provide issuers with a price premium nor make investors sacrifice on lower returns. Socially responsible investing (SRI) funds generate no higher riskadjusted long-term returns than non-SRI funds. Finally, we briefly suggest several topics for future research on sustainable finance.

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“…Finally, in a recent US work, Mayberry and Watson (2020) take issue with the use of third-party CSR ratings, such as the KLD index, in prior CSR-tax avoidance work, noting endogeneity and validity concerns as well as selection bias, as firms may undertake activities to manipulate ratings. This study uses the enactment of states' constituency statutes, which reduce the marginal cost of CSR activities, as a natural experiment.…”

Section: Csr and Tax Avoidance Policies Of The Firmmentioning

confidence: 99%

“…When examining the relationship between tax avoidance and CSR, many studies proxy for CSR using third-party rating systems, such as KLD. Given concerns raised by Mayberry and Watson (2020), another avenue to further the CSR-tax avoidance literature is to consider other ways to capture the concept of social responsibility without relying solely on third-party measures or a firm's own disclosures. To this end, prior literature has examined various characteristics of the firm's location and operating environment, under the premise that the social and moral characteristics of the population surrounding the firm will spill over to affect corporate culture and influence firm decisions.…”

Section: The Effect Of the Firm's Operating Environment And Societymentioning

confidence: 99%

A Review of Corporate Social Responsibility and Reputational Costs in the Tax Avoidance Literature*

Krieg

2021

Accounting Perspectives

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In recent years, academic researchers, policymakers, and the public have increasingly focused on the tax avoidance behavior of corporations. At the same time, firms are increasingly pressured to incorporate corporate social responsibility (CSR) into their decision making, leading to heightened academic interest in CSR. Given that opponents of corporate tax avoidance often argue that avoiding tax is socially irresponsible, we review the growing literature surrounding this issue. We begin with a theoretical review of how corporate tax avoidance fits into the CSR framework. We then review the empirical evidence on the interrelationship between CSR and firm reputation in the tax avoidance literature. We frame our review around three questions: (i) Do firms view tax avoidance as a CSR issue? (ii) Do stakeholders view tax avoidance as socially irresponsible, leading to reputational costs of tax avoidance? And (iii) Do firms change their tax avoidance behavior due to fear of these reputational consequences? Throughout our review, we provide discussions on the state of the current literature and offer suggestions for future research opportunities.

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Is Corporate Social Responsibility Related to Corporate Tax Avoidance? Evidence from a Natural Experiment

Cited by 22 publications

References 98 publications

Consequences of CSR reporting regulations worldwide: a review and research agenda

Consequences of CSR reporting regulations worldwide: a review and research agenda

Sustainable Finance: ESG/CSR, Firm Value, and Investment Returns*

A Review of Corporate Social Responsibility and Reputational Costs in the Tax Avoidance Literature*

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