UM  > Faculty of Business Administration
Corporate social responsibility, firm performance and tax risk
Xiaojun Lin1; Ming Liu2; Simon So2; Desmond Yuen2
2019
Source PublicationMANAGERIAL AUDITING JOURNAL
ABS Journal Level2
ISSN0268-6902
Volume34Issue:9Pages:1101-1130
Abstract

Purpose – The purpose of this study is to investigate whether corporate social responsibility (CSR) can lower tax risk. Previous studies have demonstrated a negative link between CSR and tax aggressiveness. Generally, corporations engaging in social irresponsibility tend to undertake aggressive tax planning; whereas socially responsible firms enjoy tax savings. Because several recent studies have suggested that lower tax payments do not necessarily create higher tax risk, an exploration of the relationship between CSR and tax risk was not only interesting but also important.

Design/methodology/approach – Using an ethical perspective of CSR, this paper argues that executives who are nourished by an ethical climate tend to make responsible and reliable operating decisions. Therefore, their corporations would have better control of tax administration, and the corresponding tax risk would be constrained. Such corporations would enjoy greater tax savings while keeping their tax risk at relatively low levels. However, this reasoning ignores the fact that limited economic resources would constrain a firm from practicing CSR in the form of donations. This situation would also influence its attitude toward tax strategies. Specifically, when a firm’s performance is unsatisfactory, the cultural effect of CSR may diminish or even disappear.

Findings – Firms donating additional resources to CSR activities can construct a more ethical work climate that encourages executives to control tax risk while lowering tax expenses. For firms with unsatisfactory performance, the ethical benefits of CSR could disappear, thus suggesting a relationship with firm performance. This finding contributes to the knowledge on the ethical implications of CSR and proposes that the culture argument is conditional on satisfactory firm performance.

Originality/value – This study explores the association between corporate culture (CSR) and tax risk. The empirical results help shareholders, analysts and other investors to make their business decision better because CSR or corporate culture is less likely to change suddenly or dramatically in an abbreviated time. The finding of this study shed light on the importance of corporate culture on making an investment evaluation or decision. In addition, this study extends the research on CSR by demonstrating that the effects of CSR are conditioned on firm performance. The beneficial effect of CSR on tax risk would disappear when firms have unfavorable financial performance.

KeywordCsr Firm Performance Tax Risk
DOIhttps://doi.org/10.1108/MAJ-04-2018-1868
Indexed BySSCI ; SSCI
Language英语
WOS Research AreaBusiness & Economics
WOS SubjectBusiness, Finance ; Management
WOS IDWOS:000489035500002
PublisherEMERALD GROUP PUBLISHING LTD, HOWARD HOUSE, WAGON LANE, BINGLEY BD16 1WA, W YORKSHIRE, ENGLAND
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Citation statistics
Cited Times [WOS]:3   [WOS Record]     [Related Records in WOS]
Document TypeJournal article
CollectionFaculty of Business Administration
DEPARTMENT OF ACCOUNTING AND INFORMATION MANAGEMENT
Corresponding AuthorMing Liu
Affiliation1.Southwest University of Political Science and Law, Chongqing, China
2.University of Macau, Taipa, Macao
Corresponding Author AffilicationUniversity of Macau
Recommended Citation
GB/T 7714
Xiaojun Lin,Ming Liu,Simon So,et al. Corporate social responsibility, firm performance and tax risk[J]. MANAGERIAL AUDITING JOURNAL,2019,34(9):1101-1130.
APA Xiaojun Lin,Ming Liu,Simon So,&Desmond Yuen.(2019).Corporate social responsibility, firm performance and tax risk.MANAGERIAL AUDITING JOURNAL,34(9),1101-1130.
MLA Xiaojun Lin,et al."Corporate social responsibility, firm performance and tax risk".MANAGERIAL AUDITING JOURNAL 34.9(2019):1101-1130.
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