The mediating role of corporate social responsibility on the relationship between governance and tax avoidance: UK common law versus French civil law

Purpose The purpose of this paper is to investigate the direct and indirect links between corporate governance and tax avoidance using corporate social responsibility (CSR). Design/methodology/approach This study is based on a sample consisting of 300 UK and 200 French firms over the period 2005-2017. This study is motivated by structural equations and system models that specify both a direct link and an indirect link between corporate governance and tax avoidance. Findings The results show that CSR fully mediates the relationship between corporate governance and tax avoidance in UK firms. In addition, in French firms, CSR partially mediates the relation between corporate governance and tax avoidance. Practical implications The findings may be of interest to the academic researchers, practitioners and regulators who are interested in discovering corporate governance score, tax avoidance and CSR. Regulators must evaluate their actual corporate governance mechanisms and their country’s legal system before mandating additional governance mechanisms for firms in their country. Social implications This study proved empirically that firms with a higher level of social responsibility are better positioned to obtain more transparency through reducing tax avoidance. Originality/value This paper extends the existing literature by examining the mediation effect of CSR on the relationship between tax avoidance and corporate governance.