Agency Costs and Tax Planning when the Government is a Major Shareholder

56 Pages Posted: 27 Mar 2013 Last revised: 6 Nov 2018

See all articles by Mark T Bradshaw

Mark T Bradshaw

Boston College

Guanmin Liao

Renmin University of China - School of Business

Mark (Shuai) Ma

University of Pittsburgh - Accounting Group

Date Written: October 31, 2018

Abstract

In state owned enterprises (SOEs), taxes are a dividend to the controlling shareholder, the state, but a cost to other shareholders. We examine publicly traded firms in China and find significantly lower tax avoidance by SOEs relative to non-SOEs. The differences are pronounced for locally versus centrally-owned SOEs and during the year of SOE term performance evaluations. We link our results to managerial incentives through promotion tests, finding that higher SOE tax rates are associated with higher promotion frequencies of SOE managers. Our results suggest managerial incentives and tax reporting are conditional on the ownership structure of the firm.

Keywords: Tax Avoidance, Ownership Structure, Agency Conflict, China, Incentives

JEL Classification: H25, G32, M40, M49

Suggested Citation

Bradshaw, Mark T and Liao, Guanmin and Ma, Mark (Shuai), Agency Costs and Tax Planning when the Government is a Major Shareholder (October 31, 2018). Journal of Accounting & Economics (JAE), Forthcoming. Available at SSRN: https://ssrn.com/abstract=2239837 or http://dx.doi.org/10.2139/ssrn.2239837

Mark T Bradshaw

Boston College ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

Guanmin Liao

Renmin University of China - School of Business ( email )

No. 59 Zhongguancun Street, Haidian District
Beijing, Beijing 100872
China

Mark (Shuai) Ma (Contact Author)

University of Pittsburgh - Accounting Group ( email )

United States

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