Corporate social responsibility and profit shifting
Corporate social responsibility and profit shifting
This paper examines the relation between corporate social responsibility (CSR) performance and tax-motivated income shifting. Using a profit-shifting measure estimated from multinational enterprises (MNEs) data, we find that parent firms with higher CSR scores shift significantly more profits to their low-tax foreign subsidiaries. Overall, our evidence suggests that MNEs engaging in CSR activities acquire legitimacy and moral capital that temper negative responses by stakeholders and thus have greater scope and chance to engage in unethical profit-shifting activities, consistent with the legitimacy theory.
Corporate Social Responsibility, Legitimacy Theory, Risk Management, Profit Shifting, Corporate Tax Systems, Agency Problems
Hasan, Iftekhar
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Karavitis, Panagiotis
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Pantelis, Kazakis
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Leung, Woon Sau
73a8bf54-6035-4f11-a9ec-74272abbacb5
Hasan, Iftekhar
47abccf8-772a-48a5-bf14-be7676fcf013
Karavitis, Panagiotis
0d25b944-3e13-49f2-9264-26acc287afc7
Pantelis, Kazakis
bad8787f-df31-41b5-b84f-929d6496ae78
Leung, Woon Sau
73a8bf54-6035-4f11-a9ec-74272abbacb5
Hasan, Iftekhar, Karavitis, Panagiotis, Pantelis, Kazakis and Leung, Woon Sau
(2024)
Corporate social responsibility and profit shifting.
European Accounting Review.
(In Press)
Abstract
This paper examines the relation between corporate social responsibility (CSR) performance and tax-motivated income shifting. Using a profit-shifting measure estimated from multinational enterprises (MNEs) data, we find that parent firms with higher CSR scores shift significantly more profits to their low-tax foreign subsidiaries. Overall, our evidence suggests that MNEs engaging in CSR activities acquire legitimacy and moral capital that temper negative responses by stakeholders and thus have greater scope and chance to engage in unethical profit-shifting activities, consistent with the legitimacy theory.
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Accepted/In Press date: 4 January 2024
Keywords:
Corporate Social Responsibility, Legitimacy Theory, Risk Management, Profit Shifting, Corporate Tax Systems, Agency Problems
Identifiers
Local EPrints ID: 486039
URI: http://eprints.soton.ac.uk/id/eprint/486039
ISSN: 0963-8180
PURE UUID: c4bc9d6e-a659-4698-afb7-cfa0dbd3d81e
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Date deposited: 08 Jan 2024 17:32
Last modified: 18 Mar 2024 04:17
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Contributors
Author:
Iftekhar Hasan
Author:
Panagiotis Karavitis
Author:
Kazakis Pantelis
Author:
Woon Sau Leung
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