Do as I Say, Not as I Do: Tax Avoidance by State-Owned Firms

This paper investigates the impact of state ownership on corporate tax policies. We use a sample of 1,731 privatized firms from 48 countries and find that firms with higher residual state ownership tend to avoid more taxes. Consistent with the “Grabbing Hand” view, which posits that expropriating, state-controlled insiders use tax avoidance to mask rent extraction, we identify that the positive relationship is stronger for firms with weaker corporate governance. In contrast, we do not find substantial supporting evidence for the “Helping Hand” view, which holds that governments use tax policy to provide financial assistance to state-owned firms.

Keywords: State ownership; tax avoidance; privatization; institutions

JEL Classification: G38; H26; H2

Suggested Citation: Suggested Citation

Chen, Ruiyuan and El Ghoul, Sadok and Guedhami, Omrane and Nash, Robert C. and Yang, Yang and Yang, Yang, Do as I Say, Not as I Do: Tax Avoidance by State-Owned Firms (December 31, 2023). Available at SSRN: https://ssrn.com/abstract=4680332 or http://dx.doi.org/10.2139/ssrn.4680332