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Financial statement comparability and corporate tax avoidance: evidence from China

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  • Muhammad Ansar Majeed
  • Chao Yan

Abstract

This paper examines whether financial statement comparability (hereafter referred to as comparability) is associated with corporate tax avoidance. We document the negative relationship between comparability and tax avoidance. Our findings indicate that comparability reduces information asymmetry, which makes the monitoring of managerial activities more effective. In addition, comparable information may increase the risk of detection of aggressive tax strategies, which leads to reputational, regulatory and political risks. We further examine how analyst coverage and product market competition influence the relationship between comparability and corporate tax avoidance. The results show that analyst coverage substitutes for the effect of comparability on tax avoidance. However, we do not obtain any conclusive evidence that product market competition plays a complementary role to comparability in reducing tax avoidance. Our results are robust to the various measures of comparability and tax avoidance and alternative methodological techniques.

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  • Muhammad Ansar Majeed & Chao Yan, 2019. "Financial statement comparability and corporate tax avoidance: evidence from China," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 32(1), pages 1813-1843, January.
    • Handle: RePEc:taf:reroxx:v:32:y:2019:i:1:p:1813-1843
    DOI: 10.1080/1331677X.2019.1640627
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    Cited by:

    1. Fernández-Rodríguez, Elena & García-Fernández, Roberto & Martínez-Arias, Antonio, 2023. "Institutional determinants of the effective tax rate in G7 and BRIC countries," Economic Systems, Elsevier, vol. 47(2).

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