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Do income taxes affect corporate social responsibility? Evidence from European‐listed companies
Author(s) -
Gandullia Luca,
Piserà Stefano
Publication year - 2019
Publication title -
corporate social responsibility and environmental management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.519
H-Index - 73
eISSN - 1535-3966
pISSN - 1535-3958
DOI - 10.1002/csr.1862
Subject(s) - corporate social responsibility , business , incentive , corporate tax , accounting , affect (linguistics) , sample (material) , corporate governance , robustness (evolution) , public economics , instrumental variable , tax avoidance , double taxation , economics , finance , econometrics , microeconomics , public relations , linguistics , philosophy , chemistry , biochemistry , chromatography , political science , gene
This study explores empirically the effects of corporate income taxes on the incentive to invest in corporate social responsibility (CSR) activities. We estimate the relation between CSR ratings and firm‐specific corporate effective tax rates for a large sample of nonfinancial‐listed companies from 15 European countries during 2006–2016. By employing an instrumental variable approach, we find that average effective tax rates are negatively correlated with CSR ratings. Our findings are also consistent under additional tests and robustness checks. We, therefore, can provide suggestive evidence that corporate taxation discourages corporate socially responsible behaviour. At the same time, in a tax policy perspective, our analysis suggests how countries could encourage through the tax system the corporate provision of sustainable investments.