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Corporate tax aggressiveness and capital structure decisions: Evidence from China

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  • Jin, Xiaoye

Abstract

We propose a theoretical model based on the trade-off theory to illustrate how corporate tax aggressiveness affects corporate debt utilization. Empirical evidence robustly supports the prediction that corporate tax aggressiveness can lead to reduced corporate debt utilization and this association is subject to firm’s size and profitability such that large firm exhibits more sensitive substitution effects and extremely profitable firms exhibits complementary effects rather than substitution effects. Finally, by focusing on Chinese firms, where controlling government ownership is more prevalent and persistent, we find that government ownership helps strengthen the association between corporate tax aggressiveness and corporate debt utilization.

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  • Jin, Xiaoye, 2021. "Corporate tax aggressiveness and capital structure decisions: Evidence from China," International Review of Economics & Finance, Elsevier, vol. 75(C), pages 94-111.
    • Handle: RePEc:eee:reveco:v:75:y:2021:i:c:p:94-111
    DOI: 10.1016/j.iref.2021.04.008
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    References listed on IDEAS

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    Cited by:

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    3. Guan Ping Zhu & He Fa Gui & Tao Peng & Chong Hui Jiang, 2023. "Corporate tax avoidance and corporate financialization: The moderating effect of managerial myopia," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(1), pages 459-472, January.

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    More about this item

    Keywords

    Tax aggressiveness; Leverage; Capital structure; China;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • K34 - Law and Economics - - Other Substantive Areas of Law - - - Tax Law

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