How CEO Political Connections Induce Corporate Social Irresponsibility: An Empirical Study of Tax Avoidance in South Korea
Abstract
:1. Introduction
2. Theory and Hypotheses
2.1. Corporate Social Irresponsibility and Tax Avoidance
2.2. CEO Political Connections and Tax Avoidance
2.3. The Moderating Role of CEO Tenure
3. Method
3.1. Data and Sample
3.2. Measures
3.2.1. Dependent Variable
- book-tax difference for firm i in year t; and
- total accruals for firm i in year t.
3.2.2. Independent Variable
3.2.3. Moderating Variable
3.2.4. Control Variables
4. Results
5. Discussion
6. Conclusions
Author Contributions
Funding
Institutional Review Board Statement
Informed Consent Statement
Data Availability Statement
Conflicts of Interest
References
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Variables | Mean | S.D. | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | |
---|---|---|---|---|---|---|---|---|---|---|---|---|
1 | Tax avoidance behavior | 0.006 | 0.061 | 1 | ||||||||
2 | ROA | 0.078 | 0.070 | 0.198 * | 1 | |||||||
3 | Firm size | 19.551 | 1.602 | 0.004 | 0.126 * | 1 | ||||||
4 | Advertising intensity | 0.137 | 0.163 | −0.004 | 0.156 * | 0.086 * | 1 | |||||
5 | PPE | 0.01 | 0.044 | −0.020 | 0.011 | 0.095 * | 0.089 * | 1 | ||||
6 | Leverage ratio | 0.129 | 0.114 | −0.039 * | −0.138 * | 0.317 * | −0.048 * | 0.085 * | 1 | |||
7 | R&D intensity | 0.006 | 0.014 | 0.014 | 0.101 * | 0.109 * | 0.168 * | −0.022 | −0.020 | 1 | ||
8 | Net operating loss | 0.073 | 0.261 | 0.087 * | −0.037 * | −0.016 | −0.004 | −0.017 | 0.085 * | 0.001 | 1 | |
9 | Net operating loss dummy | 0.021 | 0.123 | −0.016 | −0.004 | −0.015 | 0.008 | −0.010 | −0.015 | 0.018 | −0.136 * | 1 |
10 | Market-to-Book ratio | 1.171 | 1.265 | 0.104 * | 0.388 * | 0.226 * | 0.205 * | 0.034 * | 0.073 * | 0.163 * | 0.072 * | −0.002 |
11 | Intangible assets | 0.015 | 0.038 | 0.039 * | −0.017 | 0.095 * | 0.178 * | 0.049 * | 0.095 * | 0.116 * | 0.036 * | 0.017 |
12 | CEO’s educational background | 0.500 | 0.500 | −0.027 | −0.048 * | 0.064 * | −0.027 | 0.028 | 0.109 * | −0.094 * | 0.018 | 0.001 |
13 | Board size | 6.959 | 2.204 | −0.005 | 0.098 * | 0.384 * | 0.043 * | 0.039 * | 0.131 * | 0.040 * | −0.004 | −0.034 * |
14 | Outside director ratio | 0.312 | 0.144 | 0.004 | 0.018 | 0.535 * | 0.059 * | 0.010 | 0.223 * | 0.082 * | 0.044 * | −0.028 * |
15 | CEO’s politician career | 0.092 | 0.289 | 0.011 | 0.036 * | 0.072 * | 0.026 | 0.017 | 0.046 * | −0.033 * | −0.001 | −0.006 |
16 | Outside directors’ politician career | 0.607 | 0.488 | −0.016 | 0.052 * | 0.273 * | 0.032 * | 0.036 * | 0.123 * | 0.022 | 0.004 | −0.044 * |
17 | CEO political connections | 0.539 | 0.582 | 0.001 | 0.013 | 0.209 * | −0.025 | −0.026 | 0.101 * | 0.072 * | 0.001 | −0.005 |
18 | CEO tenure | 1.891 | 0.805 | 0.018 | −0.056 * | −0.165 * | −0.054 * | −0.037 * | −0.092 * | 0.055 * | −0.041 * | −0.011 |
Variables | Mean | S.D. | 10 | 11 | 12 | 13 | 14 | 15 | 16 | 17 | 18 | |
10 | Market-to-Book ratio | 1.171 | 1.265 | 1 | ||||||||
11 | Intangible assets | 0.015 | 0.038 | 0.131 * | 1 | |||||||
12 | CEO’s educational background | 0.500 | 0.500 | −0.024 | −0.046 * | 1 | ||||||
13 | Board size | 6.959 | 2.204 | 0.140 * | 0.009 | 0.102 * | 1 | |||||
14 | Outside director ratio | 0.312 | 0.144 | 0.195 * | 0.105 * | 0.057 * | 0.266 * | 1 | ||||
15 | CEO’s politician career | 0.092 | 0.289 | 0.029 * | 0.023 | 0.071 * | 0.080 * | 0.037 * | 1 | |||
16 | Outside directors’ politician career | 0.607 | 0.488 | 0.110 * | 0.028 * | 0.082 * | 0.235 * | 0.360 * | 0.035 * | 1 | ||
17 | CEO political connections | 0.539 | 0.582 | 0.068 * | −0.020 | −0.018 | 0.174 * | 0.206 * | −0.150 * | −0.134 * | 1 | |
18 | CEO tenure | 1.891 | 0.805 | −0.113 * | −0.095 * | 0.067 * | −0.010 | −0.128 * | 0.093 * | −0.063 * | 0.009 | 1 |
Variables | Model 1 | Model 2 | Model 3 |
---|---|---|---|
ROA | 0.296 *** | 0.295 *** | 0.296 *** |
(0.017) | (0.017) | (0.017) | |
Total assets | 0.002 | 0.003 * | 0.002 |
(0.001) | (0.001) | (0.001) | |
Advertising intensity | 0.039 *** | 0.037 ** | 0.036 ** |
(0.015) | (0.015) | (0.015) | |
PPE | 0.036 | 0.036 | 0.035 |
(0.030) | (0.030) | (0.030) | |
Leverage ratio | −0.080 *** | −0.078 *** | −0.078 *** |
(0.011) | (0.011) | (0.011) | |
R&D intensity | 0.0963 | 0.140 | 0.155 |
(0.152) | (0.153) | (0.153) | |
Change in net operating loss | 0.006 | 0.006 * | 0.006 * |
(0.003) | (0.003) | (0.003) | |
Net operating loss dummy | 0.011 | 0.013 | 0.013 |
(0.009) | (0.009) | (0.009) | |
Market-to-Book ratio | 0.001 | 0.001 | 0.001 |
(0.001) | (0.001) | (0.001) | |
Intangible assets | −0.031 | −0.027 | −0.027 |
(0.042) | (0.041) | (0.041) | |
CEO’s educational background | −0.001 | −0.001 | −0.001 |
(0.003) | (0.003) | (0.003) | |
Board size | 0.001 | 0.001 | 0.001 |
(0.001) | (0.001) | (0.001) | |
Outside director ratio | −0.001 | 0.001 | 0.001 |
(0.012) | (0.012) | (0.012) | |
CEO’s politician career | −0.004 | −0.008 | −0.008 |
(0.006) | (0.006) | (0.006) | |
Outside directors’ politician career | −0.002 | −0.002 | −0.002 |
(0.002) | (0.002) | (0.002) | |
CEO political connections | 0.005 ** | 0.008 *** | |
(0.002) | (0.003) | ||
CEO tenure | 0.001 *** | ||
(0.001) | |||
CPC × CEO tenure | −0.006 ** | ||
(0.001) | |||
Firm fixed | Yes | Yes | Yes |
Year fixed | Yes | Yes | Yes |
Constant | −0.298 *** | −0.301 *** | −0.296 *** |
(0.054) | (0.054) | (0.054) | |
Observations | 4706 | 4706 | 4706 |
R2 | 0.252 | 0.258 | 0.266 |
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Kim, J.-H.; Lee, J.-H. How CEO Political Connections Induce Corporate Social Irresponsibility: An Empirical Study of Tax Avoidance in South Korea. Sustainability 2021, 13, 7739. https://doi.org/10.3390/su13147739
Kim J-H, Lee J-H. How CEO Political Connections Induce Corporate Social Irresponsibility: An Empirical Study of Tax Avoidance in South Korea. Sustainability. 2021; 13(14):7739. https://doi.org/10.3390/su13147739
Chicago/Turabian StyleKim, Ji-Hee, and Ji-Hwan Lee. 2021. "How CEO Political Connections Induce Corporate Social Irresponsibility: An Empirical Study of Tax Avoidance in South Korea" Sustainability 13, no. 14: 7739. https://doi.org/10.3390/su13147739