TY - JOUR
T1 - Banking liberalization and corporate tax planning
T2 - Evidence from natural experiments
AU - Chen, Shenglan
AU - Ma, Hui
AU - Teng, Haimeng
AU - Wu, Qiang
N1 - Publisher Copyright:
© 2022 Elsevier B.V.
PY - 2022/10
Y1 - 2022/10
N2 - This paper investigates whether banking liberalization affects corporate tax planning by exploiting China's two interest rate deregulations as quasi-natural experiments. We find that firms reduce their level of tax avoidance following banking liberalization and that the identified effect is concentrated in firms with more bank borrowing after liberalization, firms located in non-financial centers, as well as non-SOE firms and firms with fewer political connections. In addition, we find that firms reduce their use of related party transactions and tax-related bribery after banking liberalization. Our results suggest that firms engage in less tax avoidance with more available/cheaper external financial resources and that, on average, the costs of engaging in tax avoidance are higher than the costs of borrowing from banks.
AB - This paper investigates whether banking liberalization affects corporate tax planning by exploiting China's two interest rate deregulations as quasi-natural experiments. We find that firms reduce their level of tax avoidance following banking liberalization and that the identified effect is concentrated in firms with more bank borrowing after liberalization, firms located in non-financial centers, as well as non-SOE firms and firms with fewer political connections. In addition, we find that firms reduce their use of related party transactions and tax-related bribery after banking liberalization. Our results suggest that firms engage in less tax avoidance with more available/cheaper external financial resources and that, on average, the costs of engaging in tax avoidance are higher than the costs of borrowing from banks.
UR - http://www.scopus.com/inward/record.url?scp=85135928444&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=85135928444&partnerID=8YFLogxK
U2 - 10.1016/j.jcorpfin.2022.102264
DO - 10.1016/j.jcorpfin.2022.102264
M3 - Article
AN - SCOPUS:85135928444
SN - 0929-1199
VL - 76
JO - Journal of Corporate Finance
JF - Journal of Corporate Finance
M1 - 102264
ER -