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

May 26, 2014

Rotman School of Management Working Paper No. 2442063

Abstract:     
We find that close customer-supplier relationships facilitate tax avoidance by both principal customers and their dependent suppliers. We investigate two mechanisms by which firms in these relationships avoid taxes. First, we find evidence that principal customers engage in a tax strategy involving centralized procurement by tax haven subsidiaries. Second, we find that close customer-supplier relationships promote the diffusion of tax avoidance knowledge from principal customers, who tend to be relatively large and sophisticated, to their dependent suppliers, who tend to be smaller and less sophisticated. Our study provides evidence of the importance of tax avoidance as a source of gains from these relationships.

Number of Pages in PDF File: 61

Keywords: Tax avoidance, customers, suppliers, stakeholder theory, supply chain

JEL Classification: H25, H26, L14


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Date posted: May 27, 2014  

Suggested Citation

Cen, Ling and Maydew, Edward L. and Zhang, Liandong and Zuo, Luo, Customer-Supplier Relationships and Corporate Tax Avoidance (May 26, 2014). Rotman School of Management Working Paper No. 2442063. 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 )
362 Sage Hall
Ithaca, NY 14853
United States
607-255-4002 (Phone)
HOME PAGE: http://www.johnson.cornell.edu/Faculty-And-Research/Profile.aspx?id=lz352

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