Research on the Impact of Corporate Tax Avoidance Behavior on Financial Risk

DOI: https://doi.org/10.62517/jel.202514102

Author(s)

Jun Zhang1, Jiawei Ma2,*

Affiliation(s)

1Changzhou Liu Guojun Vocational Technology College, Changzhou, Jiangsu, China 2Zhejiang University of Science and Technology, Hangzhou, Zhejiang, China *Corresponding Author.

Abstract

Whether corporate tax avoidance will increase financial risk has been a controversial topic. On the one hand, tax avoidance may help enterprises reduce their tax burden and increase their cash flow, thus enhancing their financial soundness. On the other hand, tax avoidance may also lead to a series of agency problems, earnings management problems and financialization problems, thus increasing the financial soundness of enterprises. lead to a series of agency problems, earnings management problems and financialization problems, thus increasing the financial risk of enterprises. This paper constructs a panel regression model to empirically test the relationship between corporate income tax avoidance and financial risk using a sample of Chinese listed companies from 2007 to 2022. Meanwhile, the reverse causality and endogeneity issues of the sample are analysed and robustness tests are conducted to ensure the reliability of the regression results. The paper analyses the heterogeneity of internal control quality, ownership and shareholding concentration and examines the three mechanisms influencing internal control quality. Finally, this paper analyzes the heterogeneity of internal control quality, property rights and equity concentration, and discusses the three influencing mechanisms of agency cost, earnings management and financialization level.

Keywords

Tax Avoidance Behavior; Financial Risks; Agency Cost; Earnings Management; Financialization Level

References

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