The Effect of Mandatory CSR Disclosures on Corporate Tax Avoidance: Evidence from a Quasi-Natural Experiment

We examine whether and how mandatory corporate social responsibility (CSR) disclosures affect corporate tax avoidance. Using a CSR disclosure mandate in China that requires a subset of firms to disclose their CSR activities as an exogenous shock to CSR disclosures, our difference-in-differences anal...

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Veröffentlicht in:Journal of international accounting research 2024-07, Vol.23 (2), p.33-57
Hauptverfasser: Cao, June, Haji, Abdifatah Ahmed, Hu, Jinshuai
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creator Cao, June
Haji, Abdifatah Ahmed
Hu, Jinshuai
description We examine whether and how mandatory corporate social responsibility (CSR) disclosures affect corporate tax avoidance. Using a CSR disclosure mandate in China that requires a subset of firms to disclose their CSR activities as an exogenous shock to CSR disclosures, our difference-in-differences analyses show that firms affected by the disclosure mandate engage in less tax avoidance relative to control firms. Additional analyses indicate that increased public scrutiny following the disclosure mandate is the likely channel through which mandatory CSR disclosures constrain tax avoidance. Cross-sectional analyses suggest that the effect of the disclosure mandate varies with institutional environments. Overall, our results indicate that the CSR disclosure mandate constrains corporate tax avoidance, which is consistent with mandatory CSR disclosures nudging firms toward more socially desirable behavior.
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subjects Corporate taxes
Cross-sectional studies
Disclosure
Social responsibility
Tax avoidance
title The Effect of Mandatory CSR Disclosures on Corporate Tax Avoidance: Evidence from a Quasi-Natural Experiment
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