Corporate Charitable Donations, Earnings Performance and Tax Avoidance

Hongfeng Sun, Meng Yang, Lidan Li and Chang Liu ()
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Hongfeng Sun: School of Economics and Management, Shihezi University, Shihezi 832003, China
Meng Yang: School of Economics and Management, Shihezi University, Shihezi 832003, China
Lidan Li: School of Accounting, Guangdong University of Foreign Studies, Guangzhou 510420, China
Chang Liu: School of Economics and Management, Shihezi University, Shihezi 832003, China

Sustainability, 2023, vol. 15, issue 4, 1-21

Abstract: Under the traditional research framework of corporate social responsibility and tax avoidance, there is no agreement on whether charitable donations constitutes an altruistic behavior or a management tool. Using a sample of Chinese firms, this paper examines the relationship between corporate charitable donations, earnings performance and tax avoidance. The evidence shows that there is a significant negative relationship between corporate charitable donations and tax avoidance. Furthermore, we found that the negative relationship between charitable donations and tax avoidance only exists in enterprises with a good earnings performance, while it is positively correlated with tax avoidance in enterprises with a poor earnings performance. This shows that earnings performance can affect the motivation for corporate charitable donations, as the charitable donations of enterprises with a good performance are mainly an altruistic behavior, while the charitable donations of enterprises with a poor performance are more of a management tool. This conclusion not only enriches and expands the research framework of corporate social responsibility and tax avoidance but also helps to clarify the disputes in the existing literature.

Keywords: charitable donations; tax avoidance; earnings performance; altruistic behavior; management tool (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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