Corporate Taxes and Corporate Social Responsibility

71 Pages Posted: 29 Sep 2020 Last revised: 19 Dec 2022

See all articles by Xin Chang

Xin Chang

Nanyang Business School, Nanyang Technological University

Yaling Jin

Southwestern University of Finance and Economics

Endong Yang

Faculty of Business Administration, University of Macau

Wenrui Zhang

The Chinese University of Hong Kong (CUHK) - Department of Finance

Date Written: December 17, 2022

Abstract

Exploiting staggered changes in state-level corporate income tax rates, we document that corporate social responsibility (CSR) performance improves substantially following tax cuts, reflecting firms’ reliance on internal funds for CSR investments. However, tax increases do not significantly weaken CSR performance, implying that CSR commitments are sticky on the upside. Tax cuts enhance CSR performance more for firms with greater tax exposure, tighter financial constraints, or stronger prosocial preferences. Additional analysis of the 2017 federal tax reform substantiates the CSR effect of tax cuts. Overall, our findings highlight essential CSR features and illustrate how corporate tax policy drives corporate sustainability.

Keywords: corporate income taxes, corporate social responsibility (CSR), ESG, sustainability, fiscal policy

JEL Classification: H25, G30, G38, M14

Suggested Citation

Chang, Xin and Jin, Yaling and Yang, Endong and Zhang, Wenrui, Corporate Taxes and Corporate Social Responsibility (December 17, 2022). Nanyang Business School Research Paper No. 20-18, Available at SSRN: https://ssrn.com/abstract=3694203 or http://dx.doi.org/10.2139/ssrn.3694203

Xin Chang

Nanyang Business School, Nanyang Technological University ( email )

Singapore, 639798
Singapore

HOME PAGE: https://personal.ntu.edu.sg/changxin/

Yaling Jin

Southwestern University of Finance and Economics ( email )

Chengdu
China

Endong Yang (Contact Author)

Faculty of Business Administration, University of Macau ( email )

Macau

Wenrui Zhang

The Chinese University of Hong Kong (CUHK) - Department of Finance ( email )

Shatin, N.T.
Hong Kong

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
368
Abstract Views
1,430
Rank
123,983
PlumX Metrics