Uncertainty in the macroeconomic environment, corporate tax avoidance and corporate credit financing: evidence from high-tech listed companies in China

Zhoutianyang Sun and Jia Li

Journal of Credit Risk

Abstract: We conduct a theoretical and empirical analysis of the relationship between corporate tax avoidance and bank credit financing on a research sample of high-tech enterprises in China from 2009 to 2021. The empirical research results show that, first, corporate tax avoidance behavior is transmitted to banks as a signal, affecting the level of bank credit financing. Under conditions of asymmetric information, the higher the level of tax avoidance, the stronger the effect of this signal and the harder it will be for enterprises to obtain financing. There is no obvious negative effect, however, when the degree of tax avoidance is low. Second, high levels of tax avoidance by enterprises can lead to a decline in the quality of accounting information and a rise in internal agency costs, which will make it harder for enterprises to obtain bank loans. We show that the quality of accounting information and internal agency costs are the intermediary mechanism through which enterprises’ tax avoidance affects bank credit financing. Third, high economic policy uncertainty can increase the negative effect of tax avoidance on enterprises’ bank credit financing. Our research deepens understanding of the economic consequences of corporate tax avoidance and the factors affecting credit financing. It also has important implications for the regulation of corporate tax avoidance and corporate financial decision-making.

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