The Influence of Corporate Social Responsibility on Lobbying Effectiveness: Evidence from Effective Tax Rates

Abstract

This paper investigates the extent to which the reputational effects of corporate social responsibility lead to increased effectiveness of corporate lobbying expenditures, as measured by effective tax rates. This interactive effect creates a tangible economic benefit for firms, and ultimately their owners, providing an opportunity for firms to address the interests of both non-owners and owners. Using archival data, this paper finds that firms with a high number of CSR strengths get a higher return on their lobbying expenditures than firms with a high number of CSR concerns, reflected in lower domestic effective tax rates. This result suggests that the competing viewpoints of the stakeholder and shareholder theories may not be as diametrically opposed as prior literature has suggested. The financial benefits that can be gained from being socially responsible may result in bottom-line profits to the shareholders, while still addressing the needs and desires of non-owner stakeholders.