Do Natural Disasters Affect Corporate Tax Avoidance? The Case of Drought

Christofer Adrian (), Mukesh Garg (), Anh Viet Pham (), Soon-Yeow Phang () and Cameron Truong ()
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Christofer Adrian: Monash University
Mukesh Garg: Monash University
Anh Viet Pham: University of Newcastle
Soon-Yeow Phang: Monash University
Cameron Truong: Monash University

Journal of Business Ethics, 2023, vol. 186, issue 1, No 6, 105-135

Abstract: Abstract Natural disaster events such as drought affect the broader economy and inflict adverse consequences for firms because of spill-over effects in an integrated economy. Contrary to the expectation that firms would engage in higher levels of corporate tax avoidance strategies when they experience a negative cash flow shock, we document consistent evidence that firms engage in less corporate tax avoidance when their headquarter states experience drought. Reduced tax avoidance is more pronounced among firms with higher CSR performance and among firms operating in states that experience a GDP decline. Collectively, the findings of our study demonstrate prosocial and ethical behavior of U.S. firms when they experience natural disaster events.

Keywords: Climate change; Corporate social responsibility; Drought; Ethics; Tax avoidance (search for similar items in EconPapers)
JEL-codes: H26 M14 Q54 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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DOI: 10.1007/s10551-022-05250-7

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