The governance role of lender monitoring: Evidence from Borrowers' tax planning

Fuzhao Zhou, Pei Shao, Feixue Xie and Jianning Huang

Advances in accounting, 2023, vol. 63, issue C

Abstract: We posit that lender monitoring increases the general outcomes of borrowers' tax avoidance while reducing opportunistic tax aggressive behaviors. We identify four lender related monitoring measures that could affect borrowers' tax planning. We find firms with a larger portion of loan shares held by lead lenders, with loans led by reputable lenders, and with a single lending relationship to have more tax avoidance and less tax aggressiveness, and firms with loan sales that weaken lenders' monitoring incentives to have less tax avoidance and more tax aggressiveness. We further find the lender monitoring effect on tax planning to be more pronounced for firms closer to financial distress and bankruptcy.

Keywords: Bank monitoring; Corporate governance; Tax avoidance; Tax planning; Financial distress; Agency cost (search for similar items in EconPapers)
JEL-codes: G21 G34 H26 M41 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:advacc:v:63:y:2023:i:c:s088261102300038x

DOI: 10.1016/j.adiac.2023.100679

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