Tax incentives and corporate social responsibility: The role of cash savings from accelerated depreciation policy

Meili Tang and Yu Wang

Economic Modelling, 2022, vol. 116, issue C

Abstract: This study examines the effect of tax incentives (TIs) on corporate social responsibility (CSR) performance as a key driver of sustainable development. While the determinants of CSR at the firm level have been widely discussed, how TIs influence CSR has scarcely been explored. Based on firm-level data from China from 2010 to 2018, we identify the causal effect of TIs on CSR using the accelerated depreciation policy for fixed assets. We find that TIs promote CSR performance, primarily manifested in three dimensions: employee; supplier, customer, and consumer; and the environment. TIs increase CSR performance through cash savings and pollution abatement mechanisms. Furthermore, we find that TIs reduce firm performance, mainly in firms that increase their CSR performance. Our evidence suggests that TIs can be an incentive for CSR, although some increases in CSR may come at the expense of corporate performance.

Keywords: Accelerated depreciation policy; Cash savings; Corporate social responsibility; Tax incentives (search for similar items in EconPapers)
JEL-codes: G30 K34 M14 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:116:y:2022:i:c:s0264999322002772

DOI: 10.1016/j.econmod.2022.106040

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