Ownership Structure and Corporate Tax Avoidance

  • Yutong Ye

Student thesis: Doctoral ThesisDoctor of Philosophy

Abstract

This thesis explores the relationship between ownership structure and tax avoidance through three aspects: the underlying incentive for controlling shareholder to avoid tax; multiple large shareholder structure; and tax avoidance and the influence of state owners in firm’s tax planning strategy. There are three relative empirical chapters respectively in this thesis. Chapter 2 investigates the tax avoidance motivation of controlling shareholder. There are two opposite arguments about the behind incentive. One is “tax saving” argument, the other is “rent extraction” argument. By utilizing the entrenchment-alignment theory of controlling shareholder, the results support the tax saving argument that controlling shareholder avoid tax in order to reduce tax expense of the firm instead of diverting the resources from the firm. Chapter 3 reveals the corporate governance role of multiple large shareholders among tax avoidance issues. Unlike most literatures that find a linear relationship, the relationship between ownership of multiple large shareholder and tax avoidance is found to be non-linear. Specifically, the results show that multiple large shareholders have a monitoring-collusion effect on controlling shareholder's tax avoidance behaviour. Monitoring effect refers that the increasing ownership of multiple large shareholders will motivate them to monitor the controlling shareholder to reduce tax payment. However, they will collude with the controlling shareholder and lose motivation to reduce the tax payment as their ownership keep increasing up to a threshold, which is known as collusion effect. Chapter 4 focus on the SOEs and examines the corporate governance role of multiple large shareholders on tax avoidance in SOEs. The results indicate that SOEs pay more tax than non-SOEs when the government is the controlling shareholder and the increasing ownership of multiple large shareholders alleviate the misbehaviours of SOE controlling shareholder. Overall, this thesis provides the evidence that the controlling shareholder ownership, multiple large shareholder ownership and their identity have influence on corporate tax avoidance
Date of AwardNov 2022
Original languageEnglish
Awarding Institution
  • Coventry University
SupervisorYilmaz Guney (Supervisor), Jun Wang (Supervisor) & Jian Liu (Supervisor)

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