Simultaneous debt–equity holdings and corporate tax avoidance

Tian Tang, Liang Xu, Xinyan Yan and Haoyi Yang

Journal of Corporate Finance, 2022, vol. 72, issue C

Abstract: Dual holders, financial institutions that simultaneously hold the debt and equity claims of the same firms, increase corporate tax avoidance. The positive effect is more pronounced in firms with greater ex-ante risk-taking managerial incentives and higher short-term investor ownership. We also find that tax avoidance is associated with a lower cost of debt in the presence of dual holders. We suggest that after-tax awards are a mechanism through which dual holders influence corporate tax strategies. The evidence demonstrates that dual holding increases tax avoidance through mitigating shareholder–creditor conflicts. Our results are robust to endogeneity concerns and alternative tax avoidance measures.

Keywords: Simultaneous debt-equity holding; Dual holding; Tax avoidance; Conflict of interest (search for similar items in EconPapers)
JEL-codes: G20 G32 H26 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0929119921002765
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:72:y:2022:i:c:s0929119921002765

DOI: 10.1016/j.jcorpfin.2021.102154

Access Statistics for this article

Journal of Corporate Finance is currently edited by A. Poulsen and J. Netter

More articles in Journal of Corporate Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().