Is Corporate Tax Avoidance Related to Employee Treatment?

S. Schochet, M. Benlemlih and Jamil Jaballah
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S. Schochet: Brooklyn College [CUNY] - CUNY - City University of New York [New York]
M. Benlemlih: Métis Lab EM Normandie - EM Normandie - École de Management de Normandie = EM Normandie Business School
Jamil Jaballah: EESC-GEM Grenoble Ecole de Management

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Abstract: This paper investigates the empirical association between corporate tax avoidance and employee treatment. Using both aggressive and innocuous tax avoidance measures and MSCI ESG's ``Employee Relations'' dimension, we provide strong evidence of a positive relationship between the two constructs. Our findings are robust to various measures of corporate tax avoidance and employee treatment. Our testing also indicates that the positive relationship is driven by the ``strengths'' dimension of employee treatment for risky tax avoidance and ``concerns'' for innocuous tax avoidance. Taken together, our study's results are consistent with the theories of labor incidence and compensating differentials and suggest that employees require a compensation premium for bearing the increased financial risks resulting from CTA. © 2022 Elsevier B.V.

Keywords: Compensating differentials; Corporate tax avoidance; Employee treatment; Labor incidence (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

Published in Journal of Empirical Finance, 2022, 69, pp.63-80. ⟨10.1016/j.jempfin.2022.08.002⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04454690

DOI: 10.1016/j.jempfin.2022.08.002

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