Corporate Social Responsibility (CSR) Decoupling and Tax Avoidance: Symbolic Use of Sustainable Boards in the European Union?

Abstract

This study explores the relationship between corporate social responsibility (CSR) decoupling and tax avoidance, as well as the moderating effect of sustainable boards on this relationship. Based on agency and legitimacy theories, we used panel data of listed firms headquartered in the European Union (2076 firm-year observations) in the 2017–2022 fiscal period. In line with the theoretical framework and based on several regression analyses, we found that CSR decoupling and tax avoidance were significantly positively related. In line with the assumption of a symbolic, sustainable boards strengthen this relationship. The results remained consistent following several robustness tests and endogeneity checks. The study mainly contributes to the literature by raising awareness about the relationship between CSR and tax avoidance. To the best of our knowledge, this is the first empirical study on the link between CSR decoupling and tax avoidance and the moderating effect of sustainable boards. Future research should determine the impact of the sub-pillars of CSR decoupling and evaluate tax disclosure in CSR reports. Corporations should promote integrated tax and sustainability management as substantive stakeholder tools.