Tax avoidance and firm risk: evidence from China

Cao, Y; Feng, Z; Lu, M; Shan, Y

Tax avoidance and firm risk: evidence from China

Cao, Y Feng, Z Lu, M Shan, Y

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Publisher:: WILEY
Publication Type:: Journal Article
Citation:: Accounting and Finance, 2021, 61, (3), pp. 4967-5000
Issue Date:: 2021-09-01

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Field	Value	Language
dc.contributor.author	Cao, Y
dc.contributor.author	Feng, Z
dc.contributor.author	Lu, M
dc.contributor.author	Shan, Y https://orcid.org/0000-0003-2156-8722
dc.date.accessioned	2021-12-23T03:46:17Z
dc.date.available	2021-12-23T03:46:17Z
dc.date.issued	2021-09-01
dc.identifier.citation	Accounting and Finance, 2021, 61, (3), pp. 4967-5000
dc.identifier.issn	0810-5391
dc.identifier.issn	1467-629X
dc.identifier.uri	http://hdl.handle.net/10453/152484
dc.description.abstract	Prior literature documents puzzling evidence revealing that tax avoidance activities do not affect firm-specific risk. Using an extended US sample, we find that lower cash effective tax rates (ETRs) are associated with higher future return volatility, supporting the traditional view of tax risk–return trade-off. In sharp contrast to the US evidence, our analysis of Chinese firms suggests that Chinese state-owned enterprises (SOEs) with lower cash and GAAP ETRs tend to have lower future risk. In addition, we adopt a difference-in-differences approach based on the variations generated by two exogenous, anti-tax avoidance regulations in China but find no evidence suggesting a causal relationship between tax avoidance and firm risk. Overall, our results suggest that the relationship between tax avoidance and risk varies across countries, sample periods and tax aggressiveness measures, and we highlight the importance of addressing the endogenous nature in future research.
dc.language	English
dc.publisher	WILEY
dc.relation	http://purl.org/au-research/grants/arc/DP180100388
dc.relation.ispartof	Accounting and Finance
dc.relation.isbasedon	10.1111/acfi.12769
dc.rights	info:eu-repo/semantics/closedAccess
dc.subject	1402 Applied Economics, 1501 Accounting, Auditing and Accountability, 1502 Banking, Finance and Investment
dc.subject.classification	Accounting
dc.title	Tax avoidance and firm risk: evidence from China
dc.type	Journal Article
utslib.citation.volume	61
utslib.for	1402 Applied Economics
utslib.for	1501 Accounting, Auditing and Accountability
utslib.for	1502 Banking, Finance and Investment
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Faculty of Business/Accounting Discipline
utslib.copyright.status	closed_access	*
dc.date.updated	2021-12-23T03:46:16Z
pubs.issue	3
pubs.publication-status	Published
pubs.volume	61
utslib.citation.issue	3

Abstract:

Prior literature documents puzzling evidence revealing that tax avoidance activities do not affect firm-specific risk. Using an extended US sample, we find that lower cash effective tax rates (ETRs) are associated with higher future return volatility, supporting the traditional view of tax risk–return trade-off. In sharp contrast to the US evidence, our analysis of Chinese firms suggests that Chinese state-owned enterprises (SOEs) with lower cash and GAAP ETRs tend to have lower future risk. In addition, we adopt a difference-in-differences approach based on the variations generated by two exogenous, anti-tax avoidance regulations in China but find no evidence suggesting a causal relationship between tax avoidance and firm risk. Overall, our results suggest that the relationship between tax avoidance and risk varies across countries, sample periods and tax aggressiveness measures, and we highlight the importance of addressing the endogenous nature in future research.

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http://hdl.handle.net/10453/152484