The Impact of Investor Sentiment on Corporate Tax Avoidance from a Behavioral Finance Perspective

Xuanzheng Zhou

Emerging Markets Finance and Trade, 2025, vol. 61, issue 3, 773-785

Abstract: This paper delves into the intersection of investor behaviors and corporate strategies from a corporate finance perspective, thus broadening the scope of research on how investor sentiment influences corporate tax avoidance. Focusing on A-share listed companies as its primary dataset, the study explores the relationship between investor sentiment and corporate tax avoidance strategies. It reveals a notable finding: heightened investor sentiment significantly escalates corporate tax avoidance activities. Companies tend to indulge in more tax avoidance practices to align with investor expectations and secure stakeholder support as investor sentiment rises. Moreover, the research uncovers that this positive correlation between investor sentiment and tax avoidance is particularly pronounced in private sector industries and companies experiencing substantial financing constraints. This insight offers a novel perspective on behavioral finance by examining it through the lens of micro-level corporate behavior. It also provides valuable guidance for future research in corporate finance, suggesting new pathways for integrating and enhancing theoretical frameworks in this field.

Date: 2025
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DOI: 10.1080/1540496X.2024.2377985

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