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Changes in Tax Strategies Due to Corporate Sustainability: Focusing on the Disclosure of Investment Alert Issues

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  • Yoojin Shin

    (Division of Business, Chosun University, Gwangju 61452, Republic of Korea)

  • Boram Choi

    (Division of Business, Chosun University, Gwangju 61452, Republic of Korea)

Abstract

Delisting events in the stock market significantly impact capital market participants. In South Korea’s KOSDAQ, an investment alert system signals a firm’s delisting in advance. The system provides warnings to investors in the pre-delisting stage. This paper analyzes whether a firm’s tax avoidance strategy changes depending on investment alert issues, which serves as a measure to identify risks related to corporate sustainability in advance. This study conducted an empirical analysis using an OLS model, with tax avoidance as the dependent variable and the variable related to the investment alert issue as the variable of interest. Analysis of 4964 firm-year data from 2011 to 2020 revealed that firms with investor alert issues exhibited significant increases in tax avoidance behaviors. Additionally, tax avoidance significantly increased when firms were designated as investment alert issues in the designated year. These results provide empirical evidence that such designations may pose a risk to corporate sustainability and intensify a firm’s tax avoidance behavior.

Suggested Citation

  • Yoojin Shin & Boram Choi, 2024. "Changes in Tax Strategies Due to Corporate Sustainability: Focusing on the Disclosure of Investment Alert Issues," Sustainability, MDPI, vol. 16(18), pages 1-17, September.
    • Handle: RePEc:gam:jsusta:v:16:y:2024:i:18:p:8064-:d:1478621
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    References listed on IDEAS

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    1. Hee Young Ma & Sung Jong Park, 2021. "Relationship between Corporate Sustainability Management and Sustainable Tax Strategies," Sustainability, MDPI, vol. 13(13), pages 1-14, July.
    2. Fazzari, Steven M & Hubbard, R Glenn & Petersen, Bruce C, 1988. "Investment, Financing Decisions, and Tax Policy," American Economic Review, American Economic Association, vol. 78(2), pages 200-205, May.
    3. Slemrod, Joel, 2004. "The Economics of Corporate Tax Selfishness," National Tax Journal, National Tax Association;National Tax Journal, vol. 57(4), pages 877-899, December.
    4. Mounia Boulhaga & Abdelfettah Bouri & Hany Elbardan, 2022. "The effect of internal control quality on real and accrual-based earnings management: evidence from France," Journal of Management Control: Zeitschrift für Planung und Unternehmenssteuerung, Springer, vol. 33(4), pages 545-567, December.
    5. Desai, Mihir A. & Dharmapala, Dhammika, 2006. "Corporate tax avoidance and high-powered incentives," Journal of Financial Economics, Elsevier, vol. 79(1), pages 145-179, January.
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