The Moral Licensing Effects of Corporate Reputation on Tax Planning

Yu Bai, Lanyi Yan Zhang () and Lin Wang ()
Additional contact information
Yu Bai: Louisiana State University in Shreveport, Shreveport, LA 71115, USA
Lanyi Yan Zhang: University of Houston Downtown, Houston, TX 77002, USA
Lin Wang: Midwestern State University, Wichita Falls, TX 76308, USA

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 2024, vol. 27, issue 02, 1-27

Abstract: In this paper, we investigate how a firm’s reputation affects its tax planning. Drawing on the moral licensing view, we utilize a substantial dataset to test the relationship between a firm’s overall reputation standing and its propensity for tax avoidance, employing a variety of tax-related measures capturing different tax avoidance tactics. We hypothesize and find that firms with higher reputations are more inclined to engage in tax avoidance, often through tax strategies that involve a certain degree of ambiguity in transgression. Furthermore, our study indicates that highly reputable firms are less likely to participate in tax strategies that are blatant transgressions. This study adds to the body of knowledge on the correlation between reputation and tax avoidance. We enhance this field by proposing and examining the moral licensing view as a complementary perspective to comprehend this dynamic. The results of our study indicate that the deterrent power of reputation in tax avoidance may be overestimated, yielding significant insights for policymakers and practitioners.

Keywords: Moral licensing; reputation; tax avoidance; tax penalty; tax-related restatement (search for similar items in EconPapers)
Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.worldscientific.com/doi/abs/10.1142/S0219091524500164
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wsi:rpbfmp:v:27:y:2024:i:02:n:s0219091524500164

Ordering information: This journal article can be ordered from

DOI: 10.1142/S0219091524500164

Access Statistics for this article

Review of Pacific Basin Financial Markets and Policies (RPBFMP) is currently edited by Cheng-few Lee

More articles in Review of Pacific Basin Financial Markets and Policies (RPBFMP) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().