A Research On The Impact Of Tax Enforcement On Corporate Social Responsibility

Corporate social responsibility(CSR)has been a very important issue in both the theory and practice of corporate management.It is defined as firms’ relevant activities to meet the moral,ethical and social obligations,which are beyond the economic interests and legal requirements,such as the enterprises’ commitment to abide by ethics,contribute to economic development and environmental protection,improve employees’ life quality,local communities and the whole society.Existing studies have found that tax is one of the important factors affecting CSR performance.Accordingly,this study investigates the effect and the potential mechanism of tax enforcement on CSR based on China’s listed firms from2011 to 2018.By using the Third Phase of China’s Golden Tax Project as an exogenous shock to conduct a difference–in–differences estimation,we find that tax enforcement has a sizeable positive effect on CSR,which is mainly achieved through better performance in the responsibility to employee,suppliers,customers and consumer rights,and the environment.Our findings are robust to different specifications and endogeneity problems.One possible mechanism driving our results is that tax enforcement reduces corporate tax evasion,which further promotes CSR performance.Our results are found more significant for firms in more competitive industries or firms with higher level of business risk.Furthermore,the better CSR performance influenced by tax enforcement ultimately brings firms with a higher total factor productivity,market value and shareholder return.