scholarly journals Does access to credit reduce SMEs’ tax avoidance? Evidence from a regression discontinuity design

2021 ◽  
Vol 7 (1) ◽  
Author(s):  
Xiaowei Kong ◽  
Deng-Kui Si ◽  
Haiyang Li ◽  
Dongmin Kong
Keyword(s):  
Financial Constraints ◽  
Regression Discontinuity ◽  
Tax Avoidance ◽  
Bank Lending ◽  
Rent Seeking ◽  
Policy Implications ◽  
Regression Discontinuity Design ◽  
Corporate Tax ◽  
Access To Credit ◽  
Travel Costs

AbstractThis study investigates the effect of targeted reserve requirement ratio cuts (TRRRCs) on tax avoidance among small and micro enterprises (SMEs) with operating revenues below specific cutoffs in China. Using a regression discontinuity design, we causally show that, by increasing loan availability, TRRRCs significantly alleviate the financial constraints and cash dependence of SMEs and consequently reduce tax avoidance. This is especially the case among firms with lower market power and higher entertainment and travel costs. Our findings provide evidence for the real effect of TRRRCs on corporate tax avoidance and show the inclusive effect of TRRRCs on SMEs. In doing so, we indirectly reveal a rent-seeking channel underlying bank lending, thus offering clear policy implications for regulators.

scholarly journals Institutional Ownership and Corporate Tax Avoidance: New Evidence

2016 ◽  
Vol 92 (2) ◽  
pp. 101-122 ◽  
Author(s):  
Mozaffar Khan ◽  
Suraj Srinivasan ◽  
Liang Tan
Keyword(s):  
Tax Avoidance ◽  
Institutional Ownership ◽  
Regression Discontinuity Design ◽  
Corporate Tax ◽  
Profit Margins ◽  
Exogenous Shocks ◽  
Analyst Expectations ◽  
Tax Shelters ◽  
New Evidence ◽  
Shed Light

ABSTRACT We provide new evidence on the agency theory of corporate tax avoidance (Slemrod 2004; Crocker and Slemrod 2005; Chen and Chu 2005) by showing that increases in institutional ownership are associated with increases in tax avoidance. Using the Russell index reconstitution setting to isolate exogenous shocks to institutional ownership, and a regression discontinuity design that facilitates sharper identification of treatment effects, we find a significant and discontinuous increase in tax avoidance following Russell 2000 inclusion. The tax avoidance involves the use of tax shelters, and immediate benefits include higher profit margins and likelihood of meeting or beating analyst expectations. Collectively, the results shed light on the effect of increased ownership concentration on tax avoidance.

scholarly journals DO FIRMS FACING INCREASES IN FINANCIAL CONSTRAINTS TEND TO GENERATE CASH THROUGH TAX AVOIDANCE? EMPIRICAL EVIDENCE FROM INDONESIA PUBLICLY LISTED FIRMS

Scientax ◽  
2021 ◽  
Vol 2 (2) ◽  
pp. 232-247
Author(s):  
John Erhan Prasetyo Hermawan ◽  
Riko Riandoko
Keyword(s):  
Firm Value ◽  
Financial Constraints ◽  
Global Financial Crisis ◽  
Tax Avoidance ◽  
Corporate Image ◽  
Avoidance Behaviour ◽  
Regression Result ◽  
Corporate Tax ◽  
Listed Firms ◽  
The Impact

This study examines the effect of increases in financial constraints measured at both firm-specific and macroeconomic level on corporate tax avoidance behaviour. Based on a hand-collected sample of 60 publicly listed firms on Indonesia Stock Exchange (IDX) from the year 2009 to 2016, our regression result shows that firms facing increased firm-specific constraints exhibit lower cash effective tax rates ranging from 0.55 to 9.57 percent which equate to between 0.60 and 10.29 percent of operating cash flows, whereas at macroeconomic constraints do not. The firm-specific constraints result is consistent with our hypothesis and Edwards, et al. (2016), whereas macroeconomic constraints result is inconsistent. Nevertheless, its inconsistency can be caused by several factors, i.e.: (1) the change of corporate tax rate from 28 to 25 percent as fiscal policy after the impact of Global Financial Crisis 2008. It could reduce tax avoidance behaviour; (2) Indonesian Go Public Information Centre stated that the purpose of the firms’ Initial Public Offering (IPO) is not only to finance the firms’ operation due to increases in financial constraints, but also to increase firm value, improve corporate image, grow employee loyalty, maintain business continuity and get tax incentives; (3) the equity financing in Indonesia is more related to equity participation activities conducted among shareholders that’s not listed on the stock or bond markets, e.g. private placement, joint venture, mergers and acquisitions.

scholarly journals Board Level Employee Representation and Tax Avoidance in Europe

2021 ◽  
Vol 0 (0) ◽  
Author(s):  
Sigurt Vitols
Keyword(s):  
Tax Evasion ◽  
Large Scale ◽  
Policy Issue ◽  
Tax Avoidance ◽  
Policy Implications ◽  
Corporate Tax ◽  
Effective Tax Rate ◽  
Voting Power ◽  
Employee Representation ◽  
Board Level

AbstractIn part due to recent disclosures of large-scale tax evasion (e.g. Panama Papers), corporate tax avoidance has become a prominent public policy issue around the world. An increasing amount of research on this topic has focused on identifying the determinants of tax avoidance at the company and country level. Many newer studies examine differences in corporate governance as one of these determinants. However, this literature almost entirely neglects the role of board level employee representation (BLER), despite the fact that this form of ‘stakeholder governance’ is widespread in Europe. This paper addresses this gap in the literature by examining the relationship between BLER and tax avoidance at the company level. Two mechanisms are identified through which BLER might influence corporate tax behavior: 1) reduction in agency costs through monitoring and 2) the voting power of workers as board members to enter into coalitions with management and/or shareholders. Based on a sample of 2343 European listed companies between 2012 and 2017, this paper shows that companies with BLER have a higher effective tax rate (ETR) than companies without workers on the board. The analysis suggests that the ability to form coalitions through voting power is a more significant channel for influencing tax behavior than the monitoring mechanism. The policy implications are that governments should consider ‘stakeholder governance’ such as BLER as one measure supporting their efforts to combat tax avoidance.

Examining Politicians’ Wealth Accumulation in South Korea

Asian Survey ◽  
2020 ◽  
Vol 60 (2) ◽  
pp. 290-322
Author(s):  
Hoyong Jung
Keyword(s):  
South Korea ◽  
Information Disclosure ◽  
Regression Discontinuity ◽  
Rent Seeking ◽  
Political Support ◽  
Wealth Accumulation ◽  
Regression Discontinuity Design ◽  
National Assembly ◽  
Support Fund ◽  
Minimal Evidence

One of the public’s popular beliefs about politics is that politicians engage in rent-seeking behaviors, such as accumulating property, using their political power. By applying a regression discontinuity design, this study examines whether members of the National Assembly of South Korea gained assets during three elective terms (2004–2008, 2008–2012, and 2012–2016). The results contradict the public’s claim. In general, there is minimal evidence that election winners accumulate more assets than runners-up. And observing the winners’ premium for newly elected politicians in the 2012–2016 term, I find that it is related to a political support fund, which is a legitimate channel for politicians’ funding. The results suggest that an information disclosure policy can play a pivotal role in restricting politicians’ rent-seeking behaviors.

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