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Journal of Business Ethics

, Volume 153, Issue 4, pp 1067–1081 | Cite as

Business Groups and Tax Havens

  • Weichieh SuEmail author
  • Danchi Tan
Original Paper

Abstract

Setting up affiliated companies in tax havens is a legitimate, but ethically dubious, business practice. This study examines the conditions under which emerging business groups tend to use such a business practice. Business groups in emerging economies have been operating in weak institutional environments with substantial government intervention and ineffective market-supporting institutions. Having offshore companies in tax havens enables the groups to bypass some market transaction costs and institutional constraints, and it also provides them the opportunity to evade taxes and hide illegal conduct, such as bribery. Empirical evidence based on a sample of Taiwanese business groups showed that business groups with a higher level of prosocial orientation established fewer offshore companies in tax havens, as manifested by their commitment of resources to establishing nonprofit organizations. In contrast, groups that have higher levels of product and international diversification tend to use this ethically dubious business practice. However, highly internationalized groups are less likely to do so when they have committed substantial resources to prosocial activities.

Keywords

Business groups Offshore companies in tax havens Internationalization Product diversification Prosocial orientation 

Notes

Acknowledgements

This study was funded by the Ministry of Science and Technology, Taiwan (MOST 104-2410-H-004-201-MY2).

Compliance with Ethical Standards

Conflict of interest

The authors declare that they have no conflict of interest.

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Copyright information

© Springer Science+Business Media B.V., part of Springer Nature 2018

Authors and Affiliations

  1. 1.College of CommerceNational Chengchi UniversityTaipeiTaiwan

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