Abstract

http://ssrn.com/abstract=2442063
 


 



Customer-Supplier Relationships and Corporate Tax Avoidance


Ling Cen


University of Toronto - Rotman School of Management

Edward L. Maydew


University of North Carolina at Chapel Hill

Liandong Zhang


City University of Hong Kong

Luo Zuo


Cornell University - Samuel Curtis Johnson Graduate School of Management

September 12, 2016

Journal of Financial Economics (JFE), Forthcoming

Abstract:     
We investigate whether firms in close customer-supplier relationships are better able to identify and implement tax avoidance strategies via supply chains. Consistent with our prediction, we find that both principal customers and their dependent suppliers avoid more taxes than other firms. Further analysis suggests that principal customers and dependent suppliers likely engage in tax strategies involving shifting profits to tax haven subsidiaries. Moreover, tax benefits appear to explain both principal customer firms’ and dependent supplier firms’ organizational decisions. Overall, our study provides evidence of the importance of tax avoidance as a source of gains from these relationships.

Number of Pages in PDF File: 46

Keywords: Tax avoidance, customers, suppliers, industrial organization, supply chain

JEL Classification: H25, H26, L14


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Date posted: May 27, 2014 ; Last revised: September 15, 2016

Suggested Citation

Cen, Ling and Maydew, Edward L. and Zhang, Liandong and Zuo, Luo, Customer-Supplier Relationships and Corporate Tax Avoidance (September 12, 2016). Journal of Financial Economics (JFE), Forthcoming. Available at SSRN: http://ssrn.com/abstract=2442063 or http://dx.doi.org/10.2139/ssrn.2442063

Contact Information

Ling Cen
University of Toronto - Rotman School of Management ( email )
105 St. George Street
Toronto, Ontario M5S 3E6
Canada

Edward L. Maydew (Contact Author)
University of North Carolina at Chapel Hill ( email )
McColl Building
Chapel Hill, NC 27599-3490
United States
919-843-9356 (Phone)
HOME PAGE: http://www.kenan-flagler.unc.edu/faculty/directory/accounting/edward-maydew

Liandong Zhang
City University of Hong Kong ( email )
83 Tat Chee Avenue
Kowloon
Hong Kong
China
Luo Zuo
Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )
349 Sage Hall
Ithaca, NY 14853
United States
607-255-4002 (Phone)
HOME PAGE: http://www.johnson.cornell.edu/Faculty-And-Research/Profile/id/lz352

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