Is reverence for life reverence for rule? Awe culture and corporate tax avoidance in China

Chao Yan, Jiaxin Wang, Zhi Wang and Kam C. Chan

International Review of Financial Analysis, 2023, vol. 90, issue C

Abstract: We study the impact of awe culture on corporate tax avoidance. Using regional induced abortion rates to proxy for awe culture, we document that stronger awe culture is associated with a higher degree of corporate tax avoidance, confirming reverence for life is reverence for rules. Additional analysis suggests that awe culture influences corporate tax avoidance via management opportunism and risk-appetite channels. The conclusions remain intact after an array of robustness tests. Further analysis suggests that the awe culture effect on corporate tax avoidance is insignificant when senior executives or directors have overseas backgrounds or the proportion of female board members is high. However, the effect is more pronounced when firms have high financial constraints, poor internal governance, or weak taxation enforcement. Notably, given that awe culture shapes corporate behavior, firms should fully consider the effect of awe culture in their economic practices.

Keywords: Corporate tax avoidance; Abortion rate; Informal institutions; Awe culture (search for similar items in EconPapers)
JEL-codes: G30 H26 M14 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:90:y:2023:i:c:s105752192300371x

DOI: 10.1016/j.irfa.2023.102855

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