Corporate Social Responsibility Impact on Tax Avoidance: Empirical Evidence from Vietnam
Keywords:
Corporate social responsibility (CSR), tax avoidance, CEO power, VietnamAbstract
Background: Corporate social responsibility (CSR) has received increasing attention recently, with several studies attempting to explore the relationship between CSR and tax avoidance, with mixed results. These researchers have found a negative association between CSR and tax avoidance, but some other views found a positive and statistically significant relationship between tax avoidance and CSR.
Objective: The study examined the effect of CSR on tax avoidance in Vietnam-listed companies. The study also tested the moderating effect of the power of the chief executive officer of the companies examined.
Methodology: The study uses a data sample of 499 listed non-financial companies from 2016 to 2022 with 3,493 observations. The feasible generalised least squares model was used to assess the impact of CSR with the moderating effect of CEO power on tax avoidance.
Result: The research results acknowledge the moderating role of CEO power on the relationship between social responsibility and tax avoidance at the 1% significance level. This means that companies run by powerful CEOs disclose much CSR information, increasing tax avoidance.
Conclusion: CSR significantly influences tax avoidance, but there is a moderating role for CEO power in Vietnam.
Unique contributions: This study has contributed to a better understanding of the significant positive influence of social responsibility in Vietnamese listed companies on tax avoidance when a powerful CEO runs the company.
Key recommendation: The Board of Directors of Vietnamese listed companies should consider appointing the unit's founder to the position of CEO to avoid excessively increasing power and tax avoidance.
References
Abid, S. & Dammak, S. (2021). Corporate social responsibility and tax avoidance: the case of French companies. Journal of Financial Reporting and Accounting, 20(3,4), 618-638. DOI: 10.1108/JFRA-04-2020-0119
Adams, R., Almeida, H., & Ferreira, D. (2009). Understanding the relationship between founder–CEOs and firm performance. Journal of Empirical Finance, 16(1), 136–150. https://doi.org/10.1016/j.jempfin.2008.05.002
Agrawal K. (2007). Corporate Tax Planning, 6th edition, Atlantic Publishers and Distributors Ltd.
Aminah, A., Chairina, C., & Sari, Y. Y., (2018). The Influence of Company Size, Fixed Asset Intensity, Leverage, Profitability, and Political Connection to Tax Avoidance. AFEBI Accounting Review, 2(02), 30-43. DOI: 10.47312/aar.v2i02.88
Armstrong, C., Blouin, J. & Larcker, D.F. (2012). The incentive for tax planning. Journal of Accounting and Economics, 53(1), 391-411. https://doi.org/10.1016/j.jacceco.2011.04.001
Barnard, C. (1938). The functions of the executive. Harvard University Press, Cambridge M, A.
Bernard, Y., Godard, L., & Zouaoui, M. (2018). The Effect of CEOs’ Turnover on the Corporate Sustainability Performance of French Firms. Journal of Business Ethics, 150(4), 1049–1069. https://doi.org/10.1007/s10551-016-3178-7
Ben Amar, A., & Chakroun, S. (2018). Do dimensions of corporate social responsibility affect earnings management?: Evidence from France. Journal of Financial Reporting and Accounting, 16(2), 348–370, https://doi.org/10.1108/JFRA-05-2017-0033
Bose, S., Khan, H. Z., Rashid, A., & Islam, S. (2018). What drives green banking disclosure? An institutional and corporate governance perspective. Asia Pacific Journal of Management, 35(2), 501–527. https://doi.org/10.1007/s10490-017-9528-x
Buckingham, G. P. (2012). The effect of corporate social responsibility on the financial performance of listed companies in the UK. https://ethos.bl.uk/OrderDetails.do?did=1&uin=uk.bl.ethos.579943
Carroll, A. B. (1979). A three-dimensional conceptual model of corporate performance chapter view project Wiley encyclopedia of management view project. Academy of Management Review, 4(4), 497-505. https://www.researchgate.net/publication/303179257.
Chen, S., Chen, X., Cheng, Q. & Shevlin, T. (2010). Are family firms more tax aggressive than nonfamily firms? Journal of Financial Economics, 95(1). 41-61. https://doi.org/10.1016/j.jfineco.2009.02.003
Chapple, W., & Moon, J. (2005). Corporate social responsibility (CSR) in Asia: A seven country study of CSR website reporting. Business and Society, 44(4), 415. https://doi.org/10.1177/0007650305281658
Cowen, S., Ferreri, L. B., & Parker. L. D. (1987). The impact of corporate characteristics on CSR: a typology and frequency - based analysis. Accounting, Organization and Society, 12, 111-122. DOI:10.1016/0361-3682(87)90001-8
Davis, A.K., Guenther, D.A., Krull, L.K. & Williams, B.M. (2016). Do socially responsible firms pay more taxes? The Accounting Review, 91 (1), 47-68. https://doi.org/10.2308/accr-51224
Desai, M. A., & Dharmapala, D. (2009). Corporate tax avoidance and firm value. The review of Economics and Statistics, 91(3), 537-546.
Dewi, N. K, & I. K Jati. (2014). Pengaruh Karakteristik Eksekutif, Karakteristik Perusahaan, dan Dimensi Tata Kelola Perusahaan yang Baik Pada Tax Avoidance di Bursa Efek Indonesia. E-Jurnal Akuntansi Universitas Udayana, 6 (2): 249-260.
Dhaliwal, D., Li, O., Tsang, A. & Yang, Y. (2011). Voluntary nonfinancial disclosure and the cost of equity capital: the initiation of corporate social responsibility reporting. The Accounting Review, 86, 59-100.
Dhaliwal, D.S., Radhakrishnan. S., Tsang, A. & Yang, Y. G. (2012). Nonfinancial disclosure and analyst forecast accuracy: international evidence on corporate social responsibility disclosure. The Accounting Review, 87, 723 -759. https://doi.org/10.2308/accr-10218
Dyreng, S., Hanlon, M. & Maydew, E. (2008). Long-run corporate tax avoidance. The Accounting Review, 83 (1), 61-82. DOI: 10.2308/accr.2008.83.1.61
Dyreng, S., Hanlon, M., Maydew, E. & Thornock, J. (2017). Changes in corporate effective tax rates over the past 25 years. Journal of Financial Economics, 124 (3), 441-563. https://doi.org/10.1016/j.jfineco.2017.04.001
Friedman, M. (2007). The Social Responsibility of Business Is to Increase Its Profits. In: Zimmerli, W.C., Holzinger, M., Richter, K. (eds) Corporate Ethics and Corporate Governance. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-540-70818-6_14
Fuadah, L.L & Kalsum, U. (2021). The Impact of Corporate Social Responsibility on Firm Value: The Role of Tax Aggressiveness in Indonesia. Journal of Asian Finance, Economics and Business, 8 (3), 209–216. DOI:10.13106/JAFEB.2021.VOL8.NO3.0209
Gamerschlag, R., Möller, K. & Verbeeten, F. (2011). Determinants of voluntary CSR disclosure: empirical evidence from Germany. Rev Manag Sci 5, 233–262. https://doi.org/10.1007/s11846-010-0052-3
Gao, N., & Jain, B. A. (2012). Founder management and the market for corporate control for IPO firms: The moderating effect of the power structure of the firm. Journal of Business Venturing, 27(1), 112–126. https://doi.org/10.1016/j.jbusvent.2010.06.001
Gounopoulos, D. & Pham, H. (2018). Financial Expert CEOs and earnings management around initial public offerings. The international Journal of Accounting, 53, 102 – 117. https://doi.org/10.1016/j.intacc.2018.04.002
Hadi, J., & Mangoting, Y. (2014). Pengaruh Struktur Kepemilikan dan Karakteristik Dewan terhadap Penghindaran Pajak. Tax & Accounting Review, 4(2), 1-10
Hambrick, D.C. and Mason, P.A. (1984). Upper echelons: the organization as a reflection of its top managers. Academy of Management Review, 9 (2), 193-206.
Hanlon, M. & Heitzman, S. (2010). A review of tax research. Journal of Accounting and Economics, 50 (2/3),127-178.
Hidayanti, N. N, & S. Murni. (2009). Pengaruh Pengungkapan Corporate Social Responsibility Terhadap Earnings Responce Coefficient Pada Perusahaan High Profile. Jurnal Bisnis dan Akuntansi 11 (1): 1 -8
Hoi, C. K., Wu, Q., & Zhang, H. (2013). Is Corporate Social Responsibility (CSR) associated with tax avoidance? Evidence from irresponsible CSR activities. The Accounting Review, 88(6): 2025 – 2059. doi: 10.2308/accr-50544.
Huseynov, F. & Klamm, B.K. (2012). Tax avoidance, tax management and corporate social responsibility. Journal of Corporate Finance, 18(4), 804-827. https://doi.org/10.1016/j.jcorpfin.2012.06.005
Issah, O. & Rodrigues, L.L. (2021). Corporate Social Responsibility and Corporate Tax Aggressiveness: A Scientometric Analysis of the Existing Literature to Map the Future, Sustainability, 13, 6225. https://doi.org/10.3390/su13116225
Ki, E. (2012). The effect of corporate social responsibility on the tax avoidance and the market response to the tax avoidance, The Academy of Management Review, 29 (2), 107-136.
Khairunisa, K., Hapsari, D. W., & Aminah, W. (2017). Kualitas Audit, Corporate Social Responsibility, dan Ukuran Perusahaan terhadap Tax Avoidance. Jurnal Riset Akuntansi Kontemporer (JRAK), 9(1), 39-46
Kurniasih, L.; Sulardi & Suranta, S. (2017). Earnings management, Corporate Governance and Tax Avoidance: The case in Indonesia. Journal of Finance and Banking Review, 2(4), 28-35.
Lanis, R. & Richardson, G. (2012). The effect of board of director composition on corporate tax aggressiveness. Journal of Accounting and Public Policy, 30(1), 50-70. https://doi.org/10.1016/j.jaccpubpol.2010.09.003
Lanis, R., & Richardson, G. (2015). Is corporate social responsibility performance associated with tax avoidance? Journal of Business Ethics, 127, 439–457. https://doi.org/10.1007/s10551-014-2052-8
Lawrence, P.R., & Lorsch, J.W. (1967). Organization and environment (Harvard Business School Press, Boston).
Li, F., & Srinivasan, S. (2011). Corporate governance when founders are directors. Journal of Financial Economics, 102(2), 454–469.
Liu, H. & Lee, H. (2019). The effect of corporate social responsibility on earnings management and tax avoidance in Chinese listed companies. International Journal of Accounting & Information Management, 27(4), 632–652. doi:10.1108/ijaim-08-2018-0095
Mark, A. C. (2012). Creating shared value through strategic CSR in Tourism. Https://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.566474.
McIntyre, R. S., Gardner, M., Wilkins, R., J., & Phillips, R. (2011). Corporate taxpayers & corporate tax dodgers 2008-2010. A Joint Project of Citizens for Tax Justice & the Institute on Taxation and Economic Policy. http://ctj.org/ctjreports/2011/11/corporate_taxpayers_corporate_tax_dodgers_2008-2010.php, first accessed on 20 December 2014
Minnick, K. & Noga, T. (2010), “Do corporate governance characteristics influence tax management?”, Journal of Corporate Finance, 16 (5),703-718
Omran, M.A. & Ramdhony, D. (2015). Theoretical Perspectives on corporate social responsibility disclosure: A Critical Review, International Journal of Accounting and Financial Reporting, 5(2): 38 -55, DOI:10.5296/ijafr.v5i2.8035
Rashid, A., Shams, S., Bose, S., & Khan, H. (2020), "CEO power and corporate social responsibility (CSR) disclosure: does stakeholder influence matter?", Managerial Auditing Journal, 35(9), 1279–1312. https://doi.org/10.1108/MAJ-11-2019-2463
Sanders, W. G., & Carpenter, M. A. (1998). Internationalization and firm governance: the roles of ceo compensation, top team composition, and board structure. In Management Joamal, 41 (2).
Sari, L. I. (2019). Analisis Pengaruh Return on Assets, Debt to Equity Ratio, Debt to Assets Ratio, Current Ratio. Journal of Accounting Auditing and Business – 4 (1), 301-336.
Slemrod, J.B. & Yitzhaki, S., (2000), Tax Avoidance, Evasion, and Administration, NBER, Cambridge, Working Paper No. 7473, 2000.
Stockmans, A., Lybaert, N., & Voordeckers, W. (2010). Socioemotional wealth and earnings management in private family firms. Family Business Review, 23(3), 280–294.
Watson, L. (2015). Corporate social responsibility, tax avoidance, and earnings performance. Journal of the American Taxation Association, 37 (2), 1-21. https://doi.org/10.2308/atax-51022
Waldman, D. A., & Siegel, D. (2008). Defining the socially responsible leader. The Leadership Quarterly, 19(1), 117-131. https://doi.org/10. 1016/j.leaqua.2007.12.008.
Woodward, J. (1965). Industrial organization: Theory and practice. Oxford university press, New York.
Wernicke, G., Sajko, M. & Boone, C. (2021). How much influence do CEOs have on company actions and outcomes? The example of corporate social responsibilit. Academy of Management Discoveries, 8(1), https://doi.org/10.5465/amd.2019.0074
Weisbach, D. (2002). Ten truths about tax shelters. Tax Law Review, 215, 2001–2002.
Yinyoung, R., Manisha, S., & Yoon, K. (2016). CSR and financial performance: The role of CSR awareness in the restaurant industry. International Journal of Hospitality Management, 57(1), 30-39. https://doi.org/10.1016/j.ijhm.2016.05.007
Unerman, J., & Deegan, C. (2011). Financial Accounting Theory. (2 ed.) McGraw-Hill.
Zeng,T. (2018) Relationship between corporate social responsibility and tax avoidance: international evidence. Social Responsibility Journal, https://doi.org/10.1108/SRJ-03-2018-0056
Zhang, Z., Wang, X., & Jia, M. (2021). Echoes of CEO Entrepreneurial Orientation: How and When CEO Entrepreneurial Orientation Influences Dual CSR Activities. Journal of Business Ethics, 169(4), 609–629. https://doi.org/10.1007/s10551-020-04553-x
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2024 Diem Ngo
This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.
