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Article
Publication date: 7 August 2017

Tingting Ying, Brian Wright and Wei Huang

The purpose of this paper is to investigate the influence of state shareholding and control versus institutional investors on tax aggressiveness of Chinese listed firms.

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1692

Abstract

Purpose

The purpose of this paper is to investigate the influence of state shareholding and control versus institutional investors on tax aggressiveness of Chinese listed firms.

Design/methodology/approach

By exploring recently available tax reconciliation data required under 2006 Accounting Standards for Business Enterprises on a sample of Chinese A-share listed firms, the authors calculate a direct measure of tax aggressiveness and investigate the influence of firm ownership structure on their tax aggressiveness.

Findings

The authors find that state ownership and control are positively associated with corporate tax aggressiveness. A positive link between the collective shareholding by the top ten shareholders and firm tax aggressiveness is also found. In contrast, institutional share ownership is negatively associated with corporate tax aggressiveness.

Research limitations/implications

The results indicate that political connections and ownership concentration empower firms to pursue aggressive tax planning, whereas institutional investors partially mitigate such influences.

Originality/value

This paper complements recent studies on tax aggressiveness in the USA by analyzing tax planning activities of Chinese listed firms. The authors highlight firm ownership and control factors that encourage aggressive tax planning in China. This paper has important implications for both public policy and corporate governance in emerging markets similar to China.

Details

International Journal of Accounting & Information Management, vol. 25 no. 3
Type: Research Article
ISSN: 1834-7649

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Article
Publication date: 17 June 2020

Alice Medioli, Stefano Azzali and Tatiana Mazza

Although tax-motivated income shifting has been widely explored, no studies have as yet analyzed the association between ownership structure and management decisions about…

Abstract

Purpose

Although tax-motivated income shifting has been widely explored, no studies have as yet analyzed the association between ownership structure and management decisions about income shifting. The ownership structure of multinational groups is characterized by different levels of minority interests, and our aim is to establish whether income shifting is explained by the aim of expropriation of minorities, as well as taxation avoidance.

Design/methodology/approach

We collect data on a sample of European parent companies located in five countries and their foreign subsidiaries, and run a multivariate regression based on the Huizinga and Laeven (2008) model.

Findings

Our results support the idea of minority expropriation, finding evidence of ownership-motivated income shifting. We also find that the level of minority protection affects ownership-motivated income shifting, and that, when both are present, expropriation is statistically significant.

Research limitations/implications

Although the study looks at a wide range of subsidiaries, a limitation may be that it examines only firms having parent companies in five European countries. Further research would overcome this limitation and extend the literature and take into account other income-shifting contextual variables. Our results may lead regulators to pay more attention to the protection of minority interests.

Practical implications

This research offers insights to companies and investors, and should help them to make better-informed decisions and evaluate the best contexts for investments.

Originality/value

This study enriches the literature on income shifting by revealing that it can be caused by factors other than the desire to avoid taxation. It suggests that ownership structure is crucial.

Details

Management Decision, vol. 58 no. 12
Type: Research Article
ISSN: 0025-1747

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Article
Publication date: 18 November 2020

Amneh Alkurdi and Ghassan H. Mardini

Adopting agency theory, the purpose of this study is to explore the impact of ownership structure and board of directors’ composition on the extent of tax avoidance strategies.

Abstract

Purpose

Adopting agency theory, the purpose of this study is to explore the impact of ownership structure and board of directors’ composition on the extent of tax avoidance strategies.

Design/methodology/approach

The sample included all of the Jordanian first market companies listed on the Amman Stock Exchange from 2012 to 2017, comprising 348 observations.

Findings

The main finding of the paper is that tax avoidance is negatively related to managerial and institution ownership structures, which reduces the usage of tax avoidance strategies. Foreign ownership, however, has a positive relation that increases the likelihood of adopting tax avoidance strategies.

Practical implications

This study has policy implications for policymakers in relation to designing future tax systems to reduce the possibility of engaging in tax avoidance practices.

Originality/value

To the best of the authors’ knowledge, this study is the first of its kind that investigates the effects of the managerial, foreign and institutional ownership classes and board composition on tax avoidance for Jordanian listed companies.

Details

Journal of Financial Reporting and Accounting, vol. 18 no. 4
Type: Research Article
ISSN: 1985-2517

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Article
Publication date: 29 October 2020

Ahmed Boussaidi and Mounira Hamed-Sidhom

This study sheds light on the determinants related to the corporate board of directors and the firms’ ownership nature of tax aggressiveness strategies of Tunisian listed…

Abstract

Purpose

This study sheds light on the determinants related to the corporate board of directors and the firms’ ownership nature of tax aggressiveness strategies of Tunisian listed firms and what could be their effect on its level in a postrevolution context.

Design/methodology/approach

Our research considers only nonfinancial firms listed in the Tunisian stock exchange during the 2011–2017 period. It is based on unbalanced panel data.

Findings

Findings suggest that women presence on the corporate board, CEO duality, the managerial and institutional ownership regularize significantly the level and the management's behavior of engagement in tax aggressiveness practices and reduce the firm’s overall risks of its consequences in terms of tax positions stability.

Research limitations/implications

Our investigation considers only nonfinancial firms to avoid noisy results and for the significant differences between accounting standards within financial and nonfinancial firms, besides sample homogeneity and comparability considerations.

Practical implications

This study provides evidence that some governance mechanisms, even reasonably dedicated to consider the risk of tax aggressiveness and to prevent its consequences, have a paradoxical effect and amplify the tax aggressiveness’ level rather than defending the firm’s viability and its financial stability. It offers signals to managers about specific governance attributes that strengthen and/or control the extent of tax aggressive strategies.

Social implications

This research gives a particular road map for society, investors and practitioners to depict the firms’ level of tax aggressiveness and especially to understand its attributes related to the corporate board of directors and the ownership's nature through evidences from a postrevolution context.

Originality/value

Our research contributes to prior literature by examining the effect of corporate board characteristics and different ownership natures on the extent of tax aggressiveness during and after the revolution period in Tunisia and confirms and infers some prior findings of tax aggressive determinants in underdevelopment context.

Details

EuroMed Journal of Business, vol. 16 no. 4
Type: Research Article
ISSN: 1450-2194

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Article
Publication date: 4 October 2011

Tao Zeng

The purpose of this paper is to examine the effect of institutional environment and inside ownership on the tax reporting practices of Chinese listed firms.

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767

Abstract

Purpose

The purpose of this paper is to examine the effect of institutional environment and inside ownership on the tax reporting practices of Chinese listed firms.

Design/methodology/approach

It is an empirical study using a sample of Chinese listed firms for eight years of time periods between 1998 and 2005.

Findings

This study finds that in Chinese provinces with more developed institutions, firms have higher effective tax rates; however, firms with inside ownership in these regions have lower effective tax rates. Further analysis shows that the above results hold only for non‐state‐owned firms.

Originality/value

The paper presents the first study of the impact of inside ownership and institutional environment on corporate effective tax rate in China.

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Article
Publication date: 18 December 2019

Justin Mindzak and Tao Zeng

This paper aims to examine the relationship between pyramid ownership structure and tax avoidance.

Abstract

Purpose

This paper aims to examine the relationship between pyramid ownership structure and tax avoidance.

Design/methodology/approach

This paper is an empirical work using a sample of Canadian listed firms.

Findings

Relying on several proxies for tax avoidance, the authors find that firms affiliated with pyramidal structures generally engage in more tax avoidance activities than non-affiliated firms; firms affiliated with more complex pyramids engage in more tax avoidance practices and firms located at the lower tiers of the pyramids avoid more taxes; and some pyramid-affiliated firms with larger deviation between controlling shareholders’ cash flow rights and control rights engage in more tax avoidance practices.

Social implications

A broader understanding of the relationship between pyramidal structure and tax avoidance can be pursued by including firms in other countries, where the pyramid groups (pyramid structure) are prevalent, but institutional environments differ from that of Canada.

Originality/value

This study highlights the importance of pyramid ownership in shaping tax avoidance activities among Canadian-listed firms. Canada provides an ideal setting for studying the impact of ownership structure, as it contains a diverse corporate ownership structure ranging from widely held freestanding firms to pyramidal business groups.

Details

Accounting Research Journal, vol. 33 no. 1
Type: Research Article
ISSN: 1030-9616

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Article
Publication date: 30 August 2021

Anissa Dakhli

The purpose of this paper is to investigate the direct and indirect relationship between institutional ownership and corporate tax avoidance using corporate social…

Abstract

Purpose

The purpose of this paper is to investigate the direct and indirect relationship between institutional ownership and corporate tax avoidance using corporate social responsibility (CSR) as a mediating variable.

Design/methodology/approach

This study uses panel data set of 200 French firms listed during the 2007–2018 period. The direct and indirect effects between managerial ownership and tax avoidance were tested by using structural equation model analysis.

Findings

The results indicate that institutional ownership negatively affects tax avoidance. The greater the proportion of the institutional ownership, the lower the likelihood of tax avoidance usage. From the result of the Sobel test, this study indicated that CSR partially mediates the effect of institutional ownership on corporate tax avoidance.

Practical implications

The findings have some policy and practical implications that may help regulators in improving the quality of transactions and in achieving more efficient market supervision. They recommend to the government to add regulations and restrictions to the structure of corporate ownership to control corporate tax avoidance in French companies.

Originality/value

This study extends the existing literature by examining both the direct and indirect effect of institutional ownership on corporate tax avoidance in French companies by including CSR as a mediating variable.

Details

Journal of Financial Crime, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1359-0790

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Article
Publication date: 18 August 2017

Safa Gaaya, Nadia Lakhal and Faten Lakhal

The purpose of this paper is to shed light on the effect of family ownership on corporate tax avoidance. It also investigates whether audit quality affects tax avoidance…

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2478

Abstract

Purpose

The purpose of this paper is to shed light on the effect of family ownership on corporate tax avoidance. It also investigates whether audit quality affects tax avoidance practices by family firms.

Design/methodology/approach

Based on a sample of 55 Tunisian listed companies from 2008 to 2013, the authors use GLS regression models estimated with robust standard errors, clustered at the firm level.

Findings

The results show that family ownership is positively associated with corporate tax avoidance practices, suggesting that families expropriate minority interests by extracting rents from tax-saving positions. These practices are less prominent after the 2011 Tunisian revolution, suggesting that the pressure from governments and non-governmental organizations against corruption and unethical behavior has increased after the revolution. However, the findings show that audit quality curbs the incentives of family firms to engage in aggressive tax positions, supporting the moderating effect of audit quality on the relation between family ownership and tax avoidance.

Research limitations/implications

These findings suggest that Tunisian family firms are likely to expropriate minority interests by extracting rents from tax-saving positions. However, in presence of high-quality audit, the relation turns negative, suggesting that external audit quality is an efficient corporate governance device that is likely to monitor family corporate decisions.

Originality/value

This paper extends previous research by investigating the moderating effect of external audit quality on the relation between tax avoidance and family ownership. It also examines tax avoidance by family firms in a unique setting: Tunisia, a transitioning economy subsequently to the 2011 revolution, where investors’ rights are weakly protected and the financial market is not well-developed as in more developed countries.

Details

Managerial Auditing Journal, vol. 32 no. 7
Type: Research Article
ISSN: 0268-6902

Keywords

Content available
Article
Publication date: 26 November 2019

Irenius Dwinanto Bimo, Christianus Yudi Prasetyo and Caecilia Atmini Susilandari

The purpose of this paper is to analyze the effect of internal control on tax avoidance analyzing internal (family ownership) and external (environmental uncertainty…

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5852

Abstract

Purpose

The purpose of this paper is to analyze the effect of internal control on tax avoidance analyzing internal (family ownership) and external (environmental uncertainty) factors on the effectiveness of internal control in preventing tax avoidance.

Design/methodology/approach

First, the authors examine the direct effect of the effectiveness of internal control on tax avoidance. Second, the authors examine the effect of moderation of family ownership and environmental uncertainty on the relationship of the effectiveness of internal control on tax avoidance. Third, the authors divide the full sample into two groups, high and less effectiveness of internal control to examine the direct effect of internal control effectiveness on tax avoidance and when considering moderating variables. Fourth, the authors use two different measures of the effectiveness of internal control.

Findings

This research found that effective internal control can reduce tax avoidance. Family ownership affects the relationship between internal control and tax avoidance, but environmental uncertainty does not influence the relationship between internal control and tax avoidance.

Practical implications

Internal control increases compliance with rules and policies, so companies must design and implement effective internal control to prevent tax avoidance activities in violation of tax regulations.

Originality/value

In contrast to previous studies, this study measures the effectiveness of internal control using the index of internal control practice disclosure and considers internal and external factors that can affect the effectiveness of internal control to prevent tax avoidance.

Details

Journal of Economics and Development, vol. 21 no. 2
Type: Research Article
ISSN: 2632-5330

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Article
Publication date: 21 September 2010

Tao Zeng

The purpose of this paper is to examine long‐term income tax liability for Chinese public corporations from 1998 to 2007. It also studies the factors that are associated…

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3637

Abstract

Purpose

The purpose of this paper is to examine long‐term income tax liability for Chinese public corporations from 1998 to 2007. It also studies the factors that are associated with Chinese firms' long‐run effective tax rates.

Design/methodology/approach

The paper uses the measurement of long‐run effective tax rate, developed by Dyreng et al., which is measured as the sum of taxes paid over ten years divided by the sum of pretax book income over those same ten years. This paper is an empirical study using the financial report data collected from China stock market financial statement database and corporate ownership structure change from SINA Finance database. The tests include both univariate and multivariate tests.

Findings

The paper's findings are: ten‐year effective tax rates are considerably lower than the statutory tax rate; ten‐year effective tax rates vary significantly across industries and geographic areas; profitability, firm size, capital structure, and capital intensity are all associated with ten‐year effective tax rates; corporate ownership structures, i.e. tradable vs non‐tradable shares, are related to ten‐year effective tax rates.

Research limitations/implications

Given that corporate ownership has changed dramatically in China in recent years, future studies should be conducted to explore the association between effective tax rates and ownership changes.

Practical implications

The paper is of interest to the policy makers, corporate managements, and academics, who seek to examine corporate income tax burden and the factors associated with tax rates over the long term. Given that corporate ownership has changed dramatically in China in recent year, future studies should be conducted to explore the association between effective tax rates and ownership changes.

Originality/value

The paper differs from Dyreng et al.'s paper in 2007. While Dyreng et al. conduct a univariate analysis on the association between firm characteristics and long‐run effective tax rates, this paper employs multivariate regression models to examine what factors are associated with long‐run effective tax rates. Second, this paper examines the relationship between corporate ownerships and effective tax rates.

Details

Asian Review of Accounting, vol. 18 no. 3
Type: Research Article
ISSN: 1321-7348

Keywords

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