Management Equity Incentives and Corporate Tax Avoidance: Moderating Role of The Internal Control

Wenwu X, Khurram MU, Qing L and Rafiq A (2023) Management equity incentives and corporate tax avoidance: Moderating role of the internal control. Front. Psychol. 14:1096674. doi:10.3389/fpsyg.2023.1096674

13 Pages Posted: 27 Dec 2022 Last revised: 30 Jan 2023

See all articles by Wenwu Xie

Wenwu Xie

Zhejiang University - City College

Muhammad Usman Khurram

School of economics, Zhejiang university

Asia Rafiq

affiliation not provided to SSRN

Date Written: December 20, 2022

Abstract

Under the modern enterprise system, the principal-agent relationship can cause a conflict of interests between the two power counterparts, thus affecting the degree of corporate tax avoidance. As a tool to align the interests of management and owners, management equity incentives can alleviate the conflict of interests brought about by the separation of powers and, therefore, may influence corporate tax avoidance. This paper discusses the correlation between management equity incentives and corporate tax avoidance from both theoretical and empirical perspectives. By drawing on the existing research results at home and abroad, firstly, the effect of equity incentive on tax avoidance is theoretically and normatively analyzed; secondly, a regression model of management equity incentive and corporate tax avoidance is established, and the data of listed enterprises in China from 2016 to 2020 are used to analyze the correlation between the two through the constructed model, citing the effectiveness of internal control as the moderator variable and distinguishing the ownership of enterprises nature. The following conclusions are drawn from the empirical study: (1) There is a positive relationship between management equity incentives and corporate tax avoidance. (2) Internal control failure enhances this positive relationship. (3) The impact of executive equity incentive on corporate tax avoidance is more significant in state-controlled enterprises than in private enterprises. Finally, our findings have significant implications for policymakers/regulators, public companies, investors, standard setters, managerial labor markets and the welfare of the overall economy.

Keywords: Enterprise Tax Avoidance; Management Equity Incentive; Ownership Type; Internal controls

Suggested Citation

Xie, Wenwu and Khurram, Muhammad Usman and Rafiq, Asia, Management Equity Incentives and Corporate Tax Avoidance: Moderating Role of The Internal Control (December 20, 2022). Wenwu X, Khurram MU, Qing L and Rafiq A (2023) Management equity incentives and corporate tax avoidance: Moderating role of the internal control. Front. Psychol. 14:1096674. doi:10.3389/fpsyg.2023.1096674, Available at SSRN: https://ssrn.com/abstract=4307534

Wenwu Xie

Zhejiang University - City College ( email )

Hangzhou
China

Muhammad Usman Khurram (Contact Author)

School of economics, Zhejiang university ( email )

Zijingang Campus, Zhejiang university
Hangzhou, Zhejiang 310027
China
+86-13255810632 (Phone)

Asia Rafiq

affiliation not provided to SSRN

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