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Is reverence for life reverence for rule? Awe culture and corporate tax avoidance in China

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  • Yan, Chao
  • Wang, Jiaxin
  • Wang, Zhi
  • Chan, Kam C.

Abstract

We study the impact of awe culture on corporate tax avoidance. Using regional induced abortion rates to proxy for awe culture, we document that stronger awe culture is associated with a higher degree of corporate tax avoidance, confirming reverence for life is reverence for rules. Additional analysis suggests that awe culture influences corporate tax avoidance via management opportunism and risk-appetite channels. The conclusions remain intact after an array of robustness tests. Further analysis suggests that the awe culture effect on corporate tax avoidance is insignificant when senior executives or directors have overseas backgrounds or the proportion of female board members is high. However, the effect is more pronounced when firms have high financial constraints, poor internal governance, or weak taxation enforcement. Notably, given that awe culture shapes corporate behavior, firms should fully consider the effect of awe culture in their economic practices.

Suggested Citation

  • Yan, Chao & Wang, Jiaxin & Wang, Zhi & Chan, Kam C., 2023. "Is reverence for life reverence for rule? Awe culture and corporate tax avoidance in China," International Review of Financial Analysis, Elsevier, vol. 90(C).
    • Handle: RePEc:eee:finana:v:90:y:2023:i:c:s105752192300371x
    DOI: 10.1016/j.irfa.2023.102855
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    More about this item

    Keywords

    Corporate tax avoidance; Abortion rate; Informal institutions; Awe culture;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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