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Legitimacy Judgments about Corporate Tax Avoidance: A Deliberation Experiment


Schnider, Robin; Haack, Patrick; Scherer, Andreas (2018). Legitimacy Judgments about Corporate Tax Avoidance: A Deliberation Experiment. Academy of Management. Proceedings, 2018(1):12984.

Abstract

Previous research has suggested that business firms need to engage in active dialogues with stakeholders to maintain their legitimacy. We investigate this “legitimation-as-deliberation” thesis in the context of global tax avoidance and explore whether and under what conditions deliberation leads to the legitimation or delegitimation of tax avoidance and the consultancies involved in facilitating tax avoidance. By conducting an experiment in which study participants discussed the issue of global tax avoidance with representatives of a tax accounting firm and/or representatives of an NGO critical of tax avoidance, we demonstrate that entering deliberations can indeed serve as legitimation strategy for firms. However, the direction and size of the effect depend on the relative persuasiveness of the representatives’ arguments. Moreover, representatives of the tax accounting firm have a stronger impact on participants’ legitimacy judgments about their organization, whereas representatives of the NGO mainly affect participants’ legitimacy judgments regarding the practice. Our study provides three contributions to management research. Phenomenologically, it sheds light on tax avoidance as an important but underexplored topic in management research. Methodologically, it develops an experimental design enabling causal inference about deliberative effects. Finally, theoretically, it conceptualizes legitimacy as a communicative process of making judgments.

Abstract

Previous research has suggested that business firms need to engage in active dialogues with stakeholders to maintain their legitimacy. We investigate this “legitimation-as-deliberation” thesis in the context of global tax avoidance and explore whether and under what conditions deliberation leads to the legitimation or delegitimation of tax avoidance and the consultancies involved in facilitating tax avoidance. By conducting an experiment in which study participants discussed the issue of global tax avoidance with representatives of a tax accounting firm and/or representatives of an NGO critical of tax avoidance, we demonstrate that entering deliberations can indeed serve as legitimation strategy for firms. However, the direction and size of the effect depend on the relative persuasiveness of the representatives’ arguments. Moreover, representatives of the tax accounting firm have a stronger impact on participants’ legitimacy judgments about their organization, whereas representatives of the NGO mainly affect participants’ legitimacy judgments regarding the practice. Our study provides three contributions to management research. Phenomenologically, it sheds light on tax avoidance as an important but underexplored topic in management research. Methodologically, it develops an experimental design enabling causal inference about deliberative effects. Finally, theoretically, it conceptualizes legitimacy as a communicative process of making judgments.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Business Administration
Dewey Decimal Classification:330 Economics
Language:English
Date:9 July 2018
Deposited On:23 Aug 2019 09:00
Last Modified:28 Feb 2020 08:10
Publisher:Academy of Management
ISSN:2151-6561
OA Status:Green
Publisher DOI:https://doi.org/10.5465/AMBPP.2018.258
Other Identification Number:merlin-id:17128

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