Empirical Research on Firms’ Social Responsibility: Labor Tax Avoidance and Asymmetric Labor Costs Behavior

Abstract

[eng] The goal of this thesis is to analyze the relationship between corporate social responsibility (CSR) and labor tax avoidance (LTAV) and asymmetric labor cost behavior within Social Accounting. Chapter 1 introduces the thesis. Chapter 2 is a bibliometric analysis, the goal of which is to highlight research trends and theories in empirical studies examining the relationship between CSR, tax avoidance, and LTAV. The bibliometric analysis revealed a lack of empirical studies investigating the relationship between CSR and LTAV. Furthermore, the analysis revealed that non-accounting theories, such as legitimacy theory, stakeholder theory, and Carroll’s (1991) pyramid of corporate social responsibility, are commonly employed in the field. In light of these findings, chapter 3 investigates the relationship between CSR and LTAV using a sample of Spanish firms. To this end, the analysis in chapter 3 utilizes environmental, social, and governance (ESG) data from Refinitiv Eikon and consolidated accounting information from the SABI (Sistemas de Análisis de Balances Ibéricos) and reveals a negative association between CSR and LTAV. These results indicate that socially responsible firms tend to contribute more to social security, as demonstrated by the higher values of LTAV measures used in the analysis, which suggests a lower inclination toward LTAV. These findings hold across various model specifications and measures of CSR and LTAV. Additionally, in chapter 4 I examine whether companies that express social responsibility through their social pillar score and overall ESG score display an asymmetric labor cost (LC) behavior when their operational activities change. A sample of firms from France, Germany, Italy, and Spain was used for this analysis. The results reveal evidence of LC stickiness, suggesting that socially concerned firms exhibit a more significant increase in LC when sales rise and apply lower cuts to LC compared to non-socially concerned firms when sales decline. These results are consistent across different model specifications and CSR measures.

This thesis underscores significant implications for companies, stakeholders, and particularly employees. It highlights that employees need to recognize that companies with limited social concerns, as indicated by low ESG and social pillar scores, do not fully fulfill their obligations regarding social security contributions and other labor costs. Consequently, these companies may fail to provide adequate funding for healthcare and pension benefits for their employees.