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Multiple Large Shareholders, Investment Efficiency and Corporate Tax Avoidance: Evidence from China

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  • Xiaohong Yu
  • Maonan Chen
  • Yujun Ye

Abstract

This study assesses the relationship between the ownership structure and corporate tax avoidance based on annual financial data of Chinese A-share listed firms during 2010-2020. Firstly, the empirical results demonstrate that when a listed firm has multiple large shareholders (MLS), these shareholders are likely to weaken internal monitoring and collude with each other, which will lower its corporate governance level and increase its corporate tax avoidance (CTA) level. The empirical conclusion remains valid after multiple robustness tests. Secondly, the empirical result of the baseline model is significantly influenced by the nature of ownership, the quality of external audit, the tracking of securities analysts and the firm's location. Finally, the result of our mediating effect analysis shows that the presence of MLS reduces the company investment efficiency, which provokes firms to make aggressive financial choices to obtain resources to ensure their future development.

Suggested Citation

  • Xiaohong Yu & Maonan Chen & Yujun Ye, 2024. "Multiple Large Shareholders, Investment Efficiency and Corporate Tax Avoidance: Evidence from China," Prague Economic Papers, Prague University of Economics and Business, vol. 2024(1), pages 103-136.
    • Handle: RePEc:prg:jnlpep:v:2024:y:2024:i:1:id:pep-202401-0005:p:103-136
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    References listed on IDEAS

    as
    1. DuCharme, Larry L. & Malatesta, Paul H. & Sefcik, Stephan E., 2004. "Earnings management, stock issues, and shareholder lawsuits," Journal of Financial Economics, Elsevier, vol. 71(1), pages 27-49, January.
    2. Yu, Fang (Frank), 2008. "Analyst coverage and earnings management," Journal of Financial Economics, Elsevier, vol. 88(2), pages 245-271, May.
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    More about this item

    Keywords

    corporate tax avoidance; multiple large shareholders; corporate governance; mediating effect analysis;
    All these keywords.

    JEL classification:

    • B23 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Econometrics; Quantitative and Mathematical Studies
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

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