North Korea threat risk, Korean business groups and corporate tax avoidance

Abstract

Using unique North Korea threat risk data, this paper investigates the impact of North Korea threat risk on corporate tax avoidance, with a particular focus on Korean business groups. Empirical results indicate that North Korea threat risk is positively associated with corporate tax avoidance, and this relationship is more pronounced among business groups. These findings suggest that Korean business groups, which are well-diversified internationally with multiple overseas operations, may have both a greater ability and incentive to engage in tax avoidance through various channels compared to non-business group firms during periods of high North Korea threat risk, driven by opportunistic motives.