Research seminar: Karel Hrazdil (Simon Fraser University)

We would like to invite you to a research seminar by Karel Hrazdil, Professor of Accounting at Beedie School of Business at Simon Fraser University.

Title: The Impact of Tax Avoidance Regulations on Corporate Social Responsibility: Evidence from the Adoption of Addback Statutes  

Authors: Karel Hrazdil (Simon Fraser University), Jiyuan Li (Chongqing University of Technology), Xin Li (Trinity Western University), Weiji Zhang (Simon Fraser University)

Abstract: Different U.S. states have enacted addback statutes at various times to close tax avoidance loopholes, significantly reducing the after-tax income of companies headquartered in adopting states. Leveraging these statutes as exogenous shocks to taxable income, we investigate how changes in tax avoidance regulations impact firms’ corporate social responsibility (CSR) performance. Using a difference-in-differences approach, we find that firms in states subject to addback statutes experience a significant decline in their CSR performance scores. In cross-sectional analyses, we further show that this effect is more pronounced among firms with high levels of intangibles—such as growth firms, those with significant R&D spending, and firms with a high number of patents—as well as among firms with high investment opportunities, which are more likely to be impacted by the addback statutes. We also observe that the impact is greater for firms facing higher financial constraints. Moreover, the significant effect is evident across both CSR strengths and concerns, spanning most of its dimensions, and is consistent across different providers of environmental, social, and governance (ESG) indicators. Overall, these findings highlight an unintended consequence of tax avoidance regulations and reinforce the notion that increased financial burdens from taxes can limit the capital available for CSR/ESG investments.

The seminar will take place on Thursday, March 27, 2025, in Room 105 at 14:00.

If you need a discussion slot with Prof. Hrazdil, please write to Martin Gregor, and he will try to find a suitable time.

The list of all research seminars at IES (past and forthcoming) is available at: https://ies.fsv.cuni.cz/en/research/research-seminars