KALAMAZOO—Western Michigan University assistant professor of accountancy Mingming Feng and her co-author Joo Hyung Ha won the American Accounting Association Midwest Region 2013 Best Paper award. The paper, “Corporate Social Responsibility Engagement, Tax Aggressiveness, and Firm Value,” highlights the tendency of tax aggressive firms to engage in more socially responsible business practices.
Feng and Ha analyzed the corporate social responsibility (CSR) activities of companies on the Standard and Poor’s 1500 and found that tax aggressive firms who take advantage of tax codes to minimize their taxes tend to engage in more socially responsible activities to offset the negative perception of being tax aggressive. Applying the payment of fair share of taxes as a litmus test for the claims of being socially responsible, Feng and Ha found that CSR efforts exerted by tax aggressive firms may create a perception of corporate hypocrisy and, ultimately, hurt firm value.
“We hope our study will be of interest to various stakeholders such as managers who want to know how to design the CSR strategies to maximize the benefits, investors who want to know the market value of CSR efforts and consumers who want to evaluate a firm’s authenticity regarding CSR strategies in making purchasing decisions,” says Feng.
The evidence that Feng and Ha have studied suggests that successful implementation of CSR likely depends on aligning business activities with societal expectations. “Investors incorporate the implicit motive behind CSR activities in evaluating CSR activities, and effective corporate governance mitigates the negative perception of CSR efforts of tax aggressive firms as being opportunistic rather than authentic,” says Feng.
Prior to joining WMU in 2012, Feng taught financial accounting principles and intermediate financial accounting at Oklahoma State University while completing her Ph.D. in accounting.