One Move, Two Gains: Commercial Kickbacks Suppression and Corporate Tax Avoidance

Shiyang Hu, Yulei Li, Wenhao Tan () and Cheng Xiang
Additional contact information
Shiyang Hu: Chongqing University
Yulei Li: Chongqing University
Wenhao Tan: Nanjing University of Finance and Economics
Cheng Xiang: Chongqing University

Journal of Business Ethics, 2025, vol. 202, issue 1, No 7, 117-140

Abstract: Abstract This study uses China’s Medicinal Product Procurement Reform (MPPR) as an exogenous negative shock to commercial kickbacks for Chinese pharmaceutical firms and examines the causal effect of commercial kickbacks on corporate aggressive tax avoidance. Employing a staggered difference-in-differences approach, we find a significant reduction in tax aggressiveness among firms affected by the MPPR. Mechanism analysis reveals that the reform leads to a notable decline in treated firms’ kickback-related expenses, including abnormal entertainment and travel costs and average sales personnel salaries. In line with this mechanism, we find that the suppressive effects of the MPPR on tax aggressiveness vary depending on firms’ pressures, rationalization, and opportunities for avoiding tax. These results highlight that firms engaged in unethical practices like commercial kickbacks are more likely to adopt other forms of misconduct, such as aggressive tax avoidance, thus emphasizing the need to address unethical behavior at its root cause to mitigate its broader consequences.

Keywords: Commercial kickbacks; Aggressive tax avoidance; Unethical behavior (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s10551-025-06132-4 Abstract (text/html)
Access to full text is restricted to subscribers.

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:kap:jbuset:v:202:y:2025:i:1:d:10.1007_s10551-025-06132-4

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/10551/PS2

DOI: 10.1007/s10551-025-06132-4

Access Statistics for this article

Journal of Business Ethics is currently edited by Michelle Greenwood and R. Edward Freeman

More articles in Journal of Business Ethics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().