Corporate Social Responsibility and Profit Shifting

Iftekhar Hasan, Panagiotis Karavitis, Pantelis Kazakis and Woon Sau Leung

MPRA Paper from University Library of Munich, Germany

Abstract: In this work we investigate the relationship between corporate social responsibility (CSR) and profit shifting. First, we employ worldwide data for parent firms and their foreign subsidiaries to derive a profit shifting measure. Then, drawing on legitimacy theory and risk-management strategy, we find corporate social responsibility to be positively correlated with profit shifting. In addition, we find this relationship to be stronger in parent firms in countries under the territorial tax system. We perform a battery of sensitivity tests and robustness checks to corroborate our findings. By and large, our results suggest that multinational firms with higher CSR scores shift larger amounts of profits to their low-tax foreign subsidiaries, potentially indicating strategic planning in the choice of CSR investments by multinational enterprises.

Keywords: corporate social responsibility; profit shifting; legitimacy theory; risk-management; corporate tax systems; agency problems (search for similar items in EconPapers)
JEL-codes: F23 G30 G32 H25 H26 L10 L21 M14 (search for similar items in EconPapers)
Date: 2019-01-19
New Economics Papers: this item is included in nep-cfn
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Working Paper: Corporate Social Responsibility and Profit Shifting (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:91580

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