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Corporate Social Responsibility and Profit Shifting

Author

Listed:
  • Iftekhar Hasan
  • Panagiotis Karavitis
  • Pantelis Kazakis
  • Woon Sau Leung

Abstract

This paper examines the relation between corporate social responsibility (CSR) performance and tax–motivated income shifting. Using a profit–shifting measure estimated from multinational enterprises (MNEs) data, we find that parent firms with higher CSR scores shift significantly more profits to their low-tax foreign subsidiaries. Overall, our evidence suggests that MNEs engaging in CSR activities acquire legitimacy and moral capital that temper negative responses by stakeholders and thus have greater scope and chance to engage in unethical profit-shifting activities, consistent with the legitimacy theory.

Suggested Citation

  • Iftekhar Hasan & Panagiotis Karavitis & Pantelis Kazakis & Woon Sau Leung, 2025. "Corporate Social Responsibility and Profit Shifting," European Accounting Review, Taylor & Francis Journals, vol. 34(1), pages 1-29, January.
    • Handle: RePEc:taf:euract:v:34:y:2025:i:1:p:1-29
    DOI: 10.1080/09638180.2024.2303971
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    1. is not listed on IDEAS
    2. Nicole Rigillo, 2022. "“Islands of excellence”: On the emergence of corporate socials in India," Economic Anthropology, Wiley Blackwell, vol. 9(1), pages 99-111, January.
    3. Panagiotis Karavitis & Pantelis Kazakis & Tianyue Xu, 2021. "Overconfident CEOs, Corporate Social Responsibility & Tax Avoidance: Evidence from China," Working Papers 2021_18, Business School - Economics, University of Glasgow.
    4. Abubakr Saeed & Muhammad Saad Baloch & Hammad Riaz, 2022. "Global Insights on TMT Gender Diversity in Controversial Industries: A Legitimacy Perspective," Journal of Business Ethics, Springer, vol. 179(3), pages 711-731, September.
    5. Marriott, Joshua & Bektaş, Tolga & Leung, Erik Ka Ho & Lyons, Andrew, 2025. "The billion-pound question in fashion E-commerce: Investigating the anatomy of returns," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 194(C).

    More about this item

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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