The association between corporate social responsibility activity and tax avoidance: a classical economic perspective

Jae Yeon Sim, Joe (Joonghi) Cho and Jun Yeung Hong

Applied Economics Letters, 2024, vol. 31, issue 17, 1747-1756

Abstract: This study empirically examines why firms engage in corporate social responsibility (CSR) activities based on the classical economic perspective, which is shareholder value maximization. Using the CSR index evaluated by the Korean government, we find that firms with a high score on the index are more likely to engage in tax avoidance practices to mitigate potential costs. This finding suggests that firms aiming to maximize profits strategically employ CSR activities under social pressure to accommodate heterogeneous preferences of shareholders and stakeholders.

Date: 2024
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DOI: 10.1080/13504851.2023.2206610

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