The effect of Confucian culture on corporate tax avoidance: evidence from China

Shihua Chen, Lili Xu and Khalil Jebran

Economic Research-Ekonomska Istraživanja, 2021, vol. 34, issue 1, 1342-1365

Abstract: This study investigates whether Confucian culture can influence corporate tax avoidance. We measure Confucianism using geographical-proximity based method and opt ordinary least square regression considering a sample of Chinese firms during 2004–2016. We find strong evidence that Confucian culture and tax avoidance are negatively associated and this association is less prominent for state-owned firms. Additional analysis shows that tax enforcement efforts mitigate the effect of Confucianism on tax avoidance. The results are consistent and robust to alternative measures of tax avoidance and Confucianism. Overall, the findings enrich our understanding that Confucian culture reduces tax avoidance by promoting corporate ethical behavior.

Date: 2021
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DOI: 10.1080/1331677X.2020.1825105

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