The Association between Corporate Tax Avoidance and Consistency of Corporate Social Responsibility (CSR): Evidence from South Korea

We investigate the association between corporate tax avoidance and corporate social responsibility (CSR) performance as well as the moderation effect of CSR performance consistency, using samples from South Korea. The baseline regression result suggests that there is a negative association between corporate tax avoidance and CSR performance among South Korean firms. However, as extant empirical studies find inconsistent evidence on the relationship and also the corporate culture theory suggests that the relationship could be non-monotonic and consistency is a important element to be considered in the model, we separated samples into two groups based on CSR performance, and re-examined the relationship with interaction term of CSR performance and CSR consistency as explanatory variable. Our empirical evidence suggests that tax avoidance is negatively associated with CSR performance for a high CSR performance group, whereas tax avoidance is positively associated with CSR performance for a low CSR performance group. Furthermore, our regression results indicate that a firm’s tax avoidance is negatively associated with the firm’s consistently high CSR performance, while a firm’s tax avoidance is positively associated with consistently low CSR performance.