Author(s): Aeja Park, Kyunbeom Jeong
This study analyzes the relationship between corporate social responsibility (CSR) activities and tax avoidance for companies listed on the Korea Stock Exchange, and examines whether this relationship differs depending on whether they belong to a large-scale business group, that is, a "chaebol" in Korea. As a result of the empirical analysis of this study, the measure of corporate social responsibility activity shows a significant positive (+) effect on the tax avoidance. Also, it is found that whether they belong to a “Chaebol” has negative (-) moderating effect on the relationship between the level of CSR activity and tax avoidance. These results suggest a paradigm that companies that are active in social responsibility activities also have a high level of tax avoidance because they need to raise funds for social responsibility activities or companies recognize social responsibility and tax payment as substitutes. In addition, it is found that the relationship between these CSR activities and tax avoidance may vary depending on the special corporate type ("chaebol") in Korea. In other words, unlike other general companies, Korean "chaebol" companies have sufficient funds without any reason to avoid tax for CSR activities. The results of this study are expected to provide timely and useful information to corporate decision-makers, shareholders or creditors investing in companies, evaluation institutions that evaluate social responsibility activities, tax authorities that enforce tax laws, and related institutions that enforce finances.