IDEAS home Printed from https://ideas.repec.org/a/gam/jsusta/v10y2018i6p2007-d152426.html
   My bibliography  Save this article

An Empirical Study on Effective Tax Rate and CEO Promotion: Evidence from Local SOEs in China

Author

Listed:
  • Kai Wang

    (College of Business Administration, Capital University of Economics and Business, Beijing 100070, China)

  • Haomin Zhang

    (School of Business, Macau University of Science and Technology, Macau 999078, China)

  • Sang-Bing Tsai

    (College of Business Administration, Capital University of Economics and Business, Beijing 100070, China)

  • Jin Jiang

    (Bohai Property Insurance Company Limited, Tianjin 300071, China)

  • Yun Sun

    (International Business Faculty, Beijing Normal University, Zhuhai, Zhuhai 519085, China)

  • Jiangtao Wang

    (Zhongshan Institute, University of Electronic Science and Technology of China, Zhongshan 528402, China)

Abstract

This paper investigates the influence of effective tax payment on the CEO promotion in local State Owned Enterprise (SOE) in China. Based on the analysis of listed local SOEs in China from 2004 to 2010, this paper tests the relationship between CEO promotion and tax payment. In addition, the moderating effect of pyramid layer is tested. This paper finds that there is a significant positive relationship between Effective Tax Rate (ETR) and CEO promotion, which suggests that CEOs may be aggressive in tax payment to please the local governments, who ultimately own the local SOEs. The current paper also finds that the relationship between ETR and CEO promotion is weakened as pyramid layers increase. Our conclusions enrich the literature on CEO turnover and the role of pyramid structure. The conclusions are also helpful for the SOEs’ reform in China and other developing countries. First, this paper is among the first to investigate the relationship between ETR and CEO turnover. Second, this paper highlights the function of pyramid structure in mitigating government intervention. Third, this paper also adds to the research on effective tax.

Suggested Citation

  • Kai Wang & Haomin Zhang & Sang-Bing Tsai & Jin Jiang & Yun Sun & Jiangtao Wang, 2018. "An Empirical Study on Effective Tax Rate and CEO Promotion: Evidence from Local SOEs in China," Sustainability, MDPI, vol. 10(6), pages 1-16, June.
    • Handle: RePEc:gam:jsusta:v:10:y:2018:i:6:p:2007-:d:152426
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2071-1050/10/6/2007/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2071-1050/10/6/2007/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Lei Xu & Qingxia Wu & Peng Du & Xiaojiao Qiao & Sang-Bing Tsai & Dahui Li, 2018. "Financing Target and Resale Pricing in Reward-Based Crowdfunding," Sustainability, MDPI, vol. 10(4), pages 1-10, April.
    2. Bai, Chong-En & Xu, Lixin Colin, 2005. "Incentives for CEOs with multitasks: Evidence from Chinese state-owned enterprises," Journal of Comparative Economics, Elsevier, vol. 33(3), pages 517-539, September.
    3. Adhikari, Ajay & Derashid, Chek & Zhang, Hao, 2006. "Public policy, political connections, and effective tax rates: Longitudinal evidence from Malaysia," Journal of Accounting and Public Policy, Elsevier, vol. 25(5), pages 574-595.
    4. Joseph P. H. Fan & T. J. Wong & Tianyu Zhang, 2013. "Institutions and Organizational Structure: The Case of State-Owned Corporate Pyramids," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 29(6), pages 1217-1252, December.
    5. Kato, Takao & Long, Cheryl, 2006. "CEO Turnover, Firm Performance and Enterprise Reform in China: Evidence from New Micro Data," IZA Discussion Papers 1914, Institute of Labor Economics (IZA).
    6. Sang-Bing Tsai & Jie Zhou & Yang Gao & Jiangtao Wang & Guodong Li & Yuxiang Zheng & Peng Ren & Wei Xu, 2017. "Combining FMEA with DEMATEL models to solve production process problems," PLOS ONE, Public Library of Science, vol. 12(8), pages 1-15, August.
    7. Cao, Xiaping & Pan, Xiaofei & Qian, Meijun & Tian, Gary Gang, 2017. "Political capital and CEO entrenchment: Evidence from CEO turnover in Chinese non-SOEs," Journal of Corporate Finance, Elsevier, vol. 42(C), pages 1-14.
    8. Marianne Bertrand & Paras Mehta & Sendhil Mullainathan, 2002. "Ferreting out Tunneling: An Application to Indian Business Groups," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(1), pages 121-148.
    9. Yang Gao & Sang-Bing Tsai & Xingqun Xue & Tingzhen Ren & Xiaomin Du & Quan Chen & Jiangtao Wang, 2018. "An Empirical Study on Green Innovation Efficiency in the Green Institutional Environment," Sustainability, MDPI, vol. 10(3), pages 1-13, March.
    10. repec:zbw:bofitp:2012_021 is not listed on IDEAS
    11. Chang, Eric C. & Wong, Sonia M.L., 2009. "Governance with multiple objectives: Evidence from top executive turnover in China," Journal of Corporate Finance, Elsevier, vol. 15(2), pages 230-244, April.
    12. Wenqing Wu & Xuan Huang & Yue Li & Chien-Chi Chu, 2018. "Optimal Quality Strategy and Matching Service on Crowdfunding Platforms," Sustainability, MDPI, vol. 10(4), pages 1-17, April.
    13. Lin, Chen & Ma, Yue & Malatesta, Paul & Xuan, Yuhai, 2011. "Ownership structure and the cost of corporate borrowing," Journal of Financial Economics, Elsevier, vol. 100(1), pages 1-23, April.
    14. Farrell, Kathleen A. & Whidbee, David A., 2003. "Impact of firm performance expectations on CEO turnover and replacement decisions," Journal of Accounting and Economics, Elsevier, vol. 36(1-3), pages 165-196, December.
    15. Hanlon, Michelle & Heitzman, Shane, 2010. "A review of tax research," Journal of Accounting and Economics, Elsevier, vol. 50(2-3), pages 127-178, December.
    16. Ching-Chih Chou & Chien-Wen Shen & Dapeng Gao & Yang Gao & Kai Wang & Sang-Bing Tsai, 2018. "Modelling the Dynamic Impacts of High Speed Rail Operation on Regional Public Transport—From the Perspective of Energy Economy," Energies, MDPI, vol. 11(5), pages 1-15, May.
    17. Randall Morck & Bernard Yeung, 2003. "Agency Problems in Large Family Business Groups," Entrepreneurship Theory and Practice, , vol. 27(4), pages 367-382, October.
    18. Davide Rizzotti & Claudia Frisenna & Roberta Mazzone, 2017. "The impact of family owners’ monitoring on CEO turnover decisions and the role of trust," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 21(3), pages 599-621, September.
    19. Chi-Feng Peng & Li-Hsing Ho & Sang-Bing Tsai & Yin-Cheng Hsiao & Yuming Zhai & Quan Chen & Li-Chung Chang & Zhiwen Shang, 2017. "Applying the Mahalanobis–Taguchi System to Improve Tablet PC Production Processes," Sustainability, MDPI, vol. 9(9), pages 1-17, September.
    20. Yu-Hsi Yuan & Sang-Bing Tsai & Chien-Yun Dai & Hsiao-Ming Chen & Wan-Fei Chen & Chia-Huei Wu & Guodong Li & Jiangtao Wang, 2017. "An empirical research on relationships between subjective judgement, technology acceptance tendency and knowledge transfer," PLOS ONE, Public Library of Science, vol. 12(9), pages 1-22, September.
    21. Kee‐Hong Bae & Jun‐Koo Kang & Jin‐Mo Kim, 2002. "Tunneling or Value Added? Evidence from Mergers by Korean Business Groups," Journal of Finance, American Finance Association, vol. 57(6), pages 2695-2740, December.
    22. Kato, Takao & Long, Cheryl, 2006. "CEO turnover, firm performance, and enterprise reform in China: Evidence from micro data," Journal of Comparative Economics, Elsevier, vol. 34(4), pages 796-817, December.
    23. Shu-Fong Chang & Jen-Chi Chang & Kuo-Hua Lin & Bin Yu & Yu-Cheng Lee & Sang-Bing (Jason) Tsai & Jie Zhou & Chao Wu & Zi-Chun Yan, 2014. "Measuring the Service Quality of E-Commerce and Competitive Strategies," International Journal of Web Services Research (IJWSR), IGI Global, vol. 11(3), pages 96-115, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Elena Fernández-Rodríguez & Roberto García-Fernández & Antonio Martínez-Arias, 2019. "Influence of Ownership Structure on the Determinants of Effective Tax Rates of Spanish Companies," Sustainability, MDPI, vol. 11(5), pages 1-19, March.
    2. Fernández-Rodríguez, Elena & García-Fernández, Roberto & Martínez-Arias, Antonio, 2021. "Business and institutional determinants of Effective Tax Rate in emerging economies," Economic Modelling, Elsevier, vol. 94(C), pages 692-702.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jackson Jinhong Mi & Zongsheng Huang & Kai Wang & Sang-Bing Tsai & Guodong Li & Jiangtao Wang, 2018. "The Presence of a Powerful Retailer on Dynamic Collecting Closed-Loop Supply Chain From a Sustainable Innovation Perspective," Sustainability, MDPI, vol. 10(7), pages 1-17, June.
    2. Kai-Cheng Liao & Ming-Yue Yue & Si-Wei Sun & Hong-Bo Xue & Wei Liu & Sang-Bing Tsai & Jiang-Tao Wang, 2018. "An Evaluation of Coupling Coordination between Tourism and Finance," Sustainability, MDPI, vol. 10(7), pages 1-23, July.
    3. Iwasaki, Ichiro & Ma, Xinxin & Mizobata, Satoshi, 2020. "Corporate ownership and managerial turnover in China and Eastern Europe: A comparative meta-analysis," Journal of Economics and Business, Elsevier, vol. 111(C).
    4. Hu, Fang & Leung, Sidney C.M., 2012. "Top management turnover, firm performance and government control: Evidence from China's listed state-owned enterprises," The International Journal of Accounting, Elsevier, vol. 47(2), pages 235-262.
    5. Ji, Jiao & Talavera, Oleksandr & Yin, Shuxing, 2016. "CEO Dismissal, Compensation and Topics of Board Meetings: The Case of China," MPRA Paper 70232, University Library of Munich, Germany.
    6. Ljungqvist, Alexander & Chen, Donghua & Lu, Haitian & Jiang, Dequan & Zhou, Mingming, 2015. "State Capitalism vs. Private Enterprise," CEPR Discussion Papers 10423, C.E.P.R. Discussion Papers.
    7. Chi, Wei & Wang, Yijiang, 2009. "Ownership, performance and executive turnover in China," Journal of Asian Economics, Elsevier, vol. 20(4), pages 465-478, September.
    8. Aijun Liu & Xiaohui Ji & Sang-Bing Tsai & Hui Lu & Gang Du & Feng Li & Guodong Li & Jiangtao Wang, 2018. "An Empirical Study on the Innovation Sharing Express Box: Collaborative Consumption and the Overlay Network Design," Sustainability, MDPI, vol. 10(7), pages 1-19, June.
    9. Chi, Wei & Wang, Yijiang, 2007. "Ownership, Performance and Executive Turnover," MPRA Paper 15302, University Library of Munich, Germany, revised Apr 2009.
    10. Gu, Leilei & Ni, Xiaoran & Tian, Guangning, 2022. "Controlling shareholder expropriation and labor investment efficiency," International Review of Economics & Finance, Elsevier, vol. 82(C), pages 261-274.
    11. Luis Alfonso Dau & Randall Morck & Bernard Yin Yeung, 2021. "Business groups and the study of international business: A Coasean synthesis and extension," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 52(2), pages 161-211, March.
    12. Hongjin Zhu & Yue Pan & Jiaping Qiu & Jinli Xiao, 2022. "Hometown Ties and Favoritism in Chinese Corporations: Evidence from CEO Dismissals and Corporate Social Responsibility," Journal of Business Ethics, Springer, vol. 176(2), pages 283-310, March.
    13. Deng, Yongheng & Morck, Randall & Wu, Jing & Yeung, Bernard, 2011. "Monetary and Fiscal Stimuli, Ownership Structure, and China's Housing Market," Ratio Working Papers 173, The Ratio Institute.
    14. Xin Huang & Xianling Jiang & Wei Liu & Qian Chen, 2021. "Business Group-Affiliation and Corporate Social Responsibility: Evidence from Listed Companies in China," Sustainability, MDPI, vol. 13(4), pages 1-21, February.
    15. Xunan Feng & Anders C. Johansson, 2017. "CEO Incentives in Chinese State-Controlled Firms," Economic Development and Cultural Change, University of Chicago Press, vol. 65(2), pages 223-264.
    16. Kuo-Pin Yang & Gavin M. Schwarz, 2016. "A Multilevel Analysis of the Performance Implications of Excess Control in Business Groups," Organization Science, INFORMS, vol. 27(5), pages 1219-1236, October.
    17. Randall Morck & Michael Percy & Gloria Tian & Bernard Yeung, 2005. "The Rise and Fall of the Widely Held Firm: A History of Corporate Ownership in Canada," NBER Chapters, in: A History of Corporate Governance around the World: Family Business Groups to Professional Managers, pages 65-148, National Bureau of Economic Research, Inc.
    18. El Ghoul, Sadok & Guedhami, Omrane & Wang, He & Kwok, Chuck C.Y., 2016. "Family control and corporate social responsibility," Journal of Banking & Finance, Elsevier, vol. 73(C), pages 131-146.
    19. Sumon Kumar Bhaumik & Andros Gregoriou, 2010. "‘Family’ Ownership, Tunnelling And Earnings Management: A Review Of The Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 24(4), pages 705-730, September.
    20. Yongheng Deng & Randall Morck & Jing Wu & Bernard Yeung, 2015. "China’s Pseudo-monetary Policy," Review of Finance, European Finance Association, vol. 19(1), pages 55-93.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jsusta:v:10:y:2018:i:6:p:2007-:d:152426. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.