Corporate Social Responsibility and Profit Shifting

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

Working Papers from Business School - Economics, University of Glasgow

Abstract: This paper studies the relationship between corporate social responsibility (CSR) and profit shifting. Using a profit-shifting measure derived from worldwide data for parent firms and their foreign subsidiaries, we find that corporate social responsibility is positively and significantly associated with profit shifting, consistent with the legitimacy theory and a risk-management strategy. Our findings are robust to a battery of sensitivity and endogeneity tests. Overall, our evidence suggests 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; Legitimacy theory; Risk management; Profit shifting; 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: 2020-10
New Economics Papers: this item is included in nep-cfn and nep-ind
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Corporate Social Responsibility and Profit Shifting (2025)
Working Paper: Corporate Social Responsibility and Profit Shifting (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:gla:glaewp:2020_28

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