Tax transparency and Legitimacy : a study of early adoption of GRI207

The purpose of this paper is to empirically test the influence of legitimacy threats (tax havens and financial controversies) on corporate tax transparency in France. We construct a measure of corporate tax transparency based on a standard published in December 2019 by the Global Reporting Initiative (GRI 207). We then conduct a content analysis of the public reports of firms listed on the SBF 120 index in 2019. We test the influence of legitimacy threat variables (tax havens and financial controversies) on corporate tax disclosure. All the utilized data are gathered from the examined companies' reports and the Datastream database. We find that companies that are exposed to financial controversies published in the media 5 years prior to the study (2015-2019) disclose more content related to tax issues and thus are more compliant with GRI 207. We also document that companies that face legitimacy concerns (tax havens, financial controversies) adopt specific communication strategies (they focus on the subtopics of tax disclosure and choose specific media of communication). This paper shows that the development of tax disclosure is correlated with legitimacy concerns, supporting the idea that it extends CSR reporting. Furthermore, we contribute by proposing a new measure of corporate tax disclosure based on a GRI standard. Overall, we contribute to a better understanding of tax transparency.