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Effect of corporate social responsibility on corporate tax avoidance: evidence from a matching approach

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  • Chih-Wen Mao

    (National Taipei University of Business)

Abstract

The literature provides various theories relating to the relationship between corporate social responsibility (CSR) and tax avoidance. If firms view both CSR activities and tax payments as paths toward contributing to society, CSR and tax avoidance activities exhibit a negative relationship. Conversely, the two activities exhibit a positive relationship if firms engage in CSR for the purpose of risk management. This study examines the effect of CSR on corporate tax avoidance using a matching approach. Three matching algorithms, namely nearest neighbor, radius, and kernel algorithms, are used to match the two groups of firms (CSR and non-CSR firms) in order to correct for sample selection bias. This study adopts Chinese listed firms during 2009–2016 as a research sample. Most empirical results show that CSR firms have higher book-tax differences and lower effective tax rates. This indicates that CSR firms are more aggressive in their tax avoidance. These findings imply that firms engage in CSR activities as a risk management strategy.

Suggested Citation

  • Chih-Wen Mao, 2019. "Effect of corporate social responsibility on corporate tax avoidance: evidence from a matching approach," Quality & Quantity: International Journal of Methodology, Springer, vol. 53(1), pages 49-67, January.
    • Handle: RePEc:spr:qualqt:v:53:y:2019:i:1:d:10.1007_s11135-018-0722-9
    DOI: 10.1007/s11135-018-0722-9
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    References listed on IDEAS

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    Cited by:

    1. David H.M. Hasibuan & Khomsiyah ., 2019. "Do Corporate Social Responsibility and Corporate Governance Affect Tax Aggressiveness? Evidence from Indonesia," Journal of Accounting, Business and Finance Research, Scientific Publishing Institute, vol. 7(1), pages 8-16.
    2. Osman Issah & Lúcia Lima Rodrigues, 2021. "Corporate Social Responsibility and Corporate Tax Aggressiveness: A Scientometric Analysis of the Existing Literature to Map the Future," Sustainability, MDPI, vol. 13(11), pages 1-23, June.
    3. Bohyun Yoon & Jeong-Hwan Lee & Jin-Hyung Cho, 2021. "The Effect of ESG Performance on Tax Avoidance—Evidence from Korea," Sustainability, MDPI, vol. 13(12), pages 1-16, June.
    4. Gavious, Ilanit & Livne, Gilad & Chen, Ester, 2022. "Does tax avoidance increase or decrease when tax enforcement is stronger? Evidence using CSR heterogeneity perspective," International Review of Financial Analysis, Elsevier, vol. 84(C).
    5. Itotenaan Henry Ogiri, PhD & Hillary Ukachukwu Nosiri, 2022. "CSR Practice and Tax Compliance: Is there a nexus between the two?," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 6(9), pages 440-447, September.
    6. Christofer Adrian & Mukesh Garg & Anh Viet Pham & Soon-Yeow Phang & Cameron Truong, 2023. "Do Natural Disasters Affect Corporate Tax Avoidance? The Case of Drought," Journal of Business Ethics, Springer, vol. 186(1), pages 105-135, August.

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