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The impact of labor unions on corporate tax avoidance: Evidence from Korea

Title
The impact of labor unions on corporate tax avoidance: Evidence from Korea
Authors
Shin I.Park S.
Ewha Authors
박소라
SCOPUS Author ID
박소라scopus
Issue Date
2020
Journal Title
Problems and Perspectives in Management
ISSN
1727-7051JCR Link
Citation
Problems and Perspectives in Management vol. 18, no. 2, pp. 114 - 127
Keywords
Accounting choiceChaebolsCorporate governanceLabor unionTax avoidance
Publisher
LLC CPC Business Perspectives
Indexed
SCOPUS scopus
Document Type
Review
Abstract
This study examines the effect of labor unions on corporate tax avoidance activities. Labor union is an important stakeholder in terms of corporate governance; thus, managers may engage in certain accounting choices that reflect union members' position to improve the relation with labor union. This paper empirically investigates whether managers engage in tax avoidance activities to secure financial resources for workers' pay when the negotiation power of labor unions is higher. The empirical analysis is based on a sample of firms listed in the Korean stock market from 2001 to 2008. The authors find that companies, where labor unions are organized, have a significantly higher level of tax avoidance activities. Also, the authors attempt to examine the effect of labor unions' bargaining power on tax avoidance. While the union membership ratio is not significantly related to tax avoidance, labor unions that belong to upper-level labor organizations significantly affect the increasing tax avoidance activity, on average. Moreover, companies that join an aggressive labor organization ('Minju' Federation) show a significantly higher level of tax avoidance activity, compared to those joining a moderate labor organization ('Hanguk' Federation). Furthermore, the authors show that such an effect of labor unions on tax avoidance is significant for companies, which are not affiliated with large business groups ('chaebols'). This result suggests that chaebol group management is not under pressure to negotiate with union members due to higher reputation costs. The findings of this paper offer academic and practical implications that capital market participants need to understand labor unions' effect on management's accounting choices. © 2020 LLC CPC Business Perspectives. All rights reserved.
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DOI
10.21511/ppm.18(2).2020.11
Appears in Collections:
경영대학 > 경영학전공 > Journal papers
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