Does More Managerial Power Impede or Promote Corporate Tax Avoidance? Evidence from Listed Chinese Companies

Yingkai Tang, Yao Liu, Jing Liu and Weiping Li
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Yingkai Tang: Business School, Sichuan University, Chengdu 610065, China
Yao Liu: Business School, Sichuan University, Chengdu 610065, China
Jing Liu: Business School, Sichuan University, Chengdu 610065, China

Sustainability, 2019, vol. 11, issue 7, 1-18

Abstract: Paying taxes is a form of corporate social responsibility. Corporate tax avoidance effectively reduces operating costs, thereby increasing shareholder returns, but the pros and cons are different for executives. This paper takes data from companies listed in China from 2000 to 2016 to explore the causal relationship between managerial power and corporate tax avoidance, using principal component analysis and entropy weight methodology to construct managerial power. First, we conduct an ordinary least square regression, and then we employ alternative measures to avoid taxation, and use managerial power as a robustness check. Next, we rerun the model by using quantile regression and propensity score matching. Finally, in order to tackle problems with endogeneity, we carry out regressions utilizing instrumental variables and simultaneous regression equations. We conclude that managerial power reduces corporate tax avoidance, and firms with more managerial power have fewer incentives to avoid taxes. The results of this paper can guide the taxation of companies listed on the Chinese market to achieve the full payment of tax obligations by reinforcing managerial power in companies, which improves national taxation and leads to sustained economic growth.

Keywords: managerial power; tax avoidance; instrument variable; propensity score matching (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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