The relationship between CSR performance and tax avoidance : Do firms view CSR expenses and tax payments as substitutes of complements and is the perception affected by firms' customer models?

Sammanfattning: We examine whether companies view CSR expenses and tax payments as substitutes or complements and if perceptions differ between close-to-market and business-to-business firms by looking at the relationship between CSR performance and tax avoidance. To investigate this, we use fixed effects regression models on an unbalanced dataset consisting of public firms with headquarters in the Nordics and UK. To capture tax avoidance, we use effective tax rate measures that are designed to capture non-conforming tax avoidance. We find consistent evidence that the relationship between CSR performance and tax avoidance is negative and that this relationship is stronger for firms with close-to-market customer models. Our evidence suggests that, on average, firms regard CSR expenses and tax payments as complements and that close-to-market firms are more likely to stay true to this perception.