The Effect of Foreign Institutional Ownership on Corporate Tax Avoidance: International Evidence

Posted: 14 May 2019

See all articles by Iftekhar Hasan

Iftekhar Hasan

Fordham University - Gabelli School of Business; Bank of Finland

Incheol Kim

University of Texas Rio Grande Valley (UTRGV) (Formerly University of Texas-Pan American) - College of Business and Entrepreneurship

Haimeng Teng

Rensselaer Polytechnic Institute (RPI) - Lally School of Management

Qiang Wu

Rensselaer Polytechnic Institute (RPI) - Lally School of Management

Date Written: 2016

Abstract

This study examines whether foreign institutional investors (FIIs) help explain variation in corporate tax avoidance and whether mechanisms such as tax morality, investment horizon, and corporate governance underlie the relation between FIIs and tax avoidance. We find robust evidence that FIIs are negatively associated with corporate tax avoidance. Moreover, this negative association is dominated by FIIs from countries with high tax morality, FIIs with long-term investment horizons, and FIIs from countries with high corporate governance quality. We conclude that FIIs play an active role in shaping corporate tax avoidance policy.

Keywords: tax avoidance, foreign institutional ownership, tax morale, investment horizon, corporate governance

JEL Classification: G23, G32, H26, M41

Suggested Citation

Hasan, Iftekhar and Kim, Incheol and Teng, Haimeng and Wu, Qiang, The Effect of Foreign Institutional Ownership on Corporate Tax Avoidance: International Evidence (2016). Bank of Finland Research Discussion Paper No. 26/2016. Available at SSRN: https://ssrn.com/abstract=2829327

Iftekhar Hasan (Contact Author)

Fordham University - Gabelli School of Business ( email )

Rose Hill Campus Bronx
New York, NY 10458
United States

Bank of Finland ( email )

P.O. Box 160
Helsinki 00101
Finland

Incheol Kim

University of Texas Rio Grande Valley (UTRGV) (Formerly University of Texas-Pan American) - College of Business and Entrepreneurship ( email )

1201 W University Dr
Edinburg, TX 78539
United States

Haimeng Teng

Rensselaer Polytechnic Institute (RPI) - Lally School of Management ( email )

Troy, NY 12180
United States

Qiang Wu

Rensselaer Polytechnic Institute (RPI) - Lally School of Management ( email )

110 8th St
Troy, NY 12180
United States
518-276-3338 (Phone)
518-276-8661 (Fax)

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