The bidirectional interaction between corporate social responsibility and tax avoidance: The moderating role of audit quality

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Abstract

This study analyzed the two-way connection between corporate social responsibility (CSR) and tax avoidance and examined how audit quality moderated the relationship. The previous study by Hajawiyah et al. (2022) examines the bidirectional effect of CSR and tax avoidance but with different moderating variables, which is risk management. Samples of this study were companies listed on the Indonesia Stock Exchange (IDX) from 2018 to 2020. A simultaneous test and a two-stage least squares (2SLS) regression were employed in data analysis. The results showed that audit quality did not moderate the relationship between corporate social responsibility and tax avoidance. It was also revealed that tax avoidance had no effect on corporate social responsibility and audit quality could not decrease the influence of tax avoidance on corporate social responsibility. This study also found no correlation between corporate social responsibility and tax avoidance. This study contributes to the current body of literature on tax avoidance and corporate social responsibility. Previous studies only measured a one-way correlation between tax avoidance and corporate social responsibility, while this study examined the two-way interaction and the role of audit quality in the correlation between corporate social responsibility and tax avoidance. The findings of this study can be used as a reference for company management in formulating plans and strategies related to corporate social responsibility and tax avoidance.

Keywords: Corporate Social Responsibility, Tax Avoidance, Audit Quality, Bidirectional

Authors’ individual contribution: Conceptualization — R.R.J., N.R.A., and A.H.; Methodology — R.R.J., N.R.A., and A.H.; Formal Analysis — R.R.J., N.R.A., and A.H.; Investigation — R.R.J., N.R.A., and A.H.; Writing — Original Draft — N.R.A.; Writing & Editing — R.R.J., N.R.A., and A.H.; Supervision — R.R.J.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: K16, M41, M42

Received: 23.12.2022
Accepted: 29.11.2023
Published online: 01.12.2023

How to cite this paper: Junaidi, R. R., Andriyani, N. R., & Hajawiyah, A. (2023). The bidirectional interaction between corporate social responsibility and tax avoidance: The moderating role of audit quality [Special issue]. Journal of Governance & Regulation, 12(4), 297–305. https://doi.org/10.22495/jgrv12i4siart9