Short-sale deregulation and corporate tax aggressiveness: evidence from the Chinese market

Abstract

We study whether short selling affects corporate tax aggressiveness. Exploiting staggered short-sale deregulation in the Chinese stock market as a source of variation in market pressure and monitoring, our difference-in-differences estimates show that the introduction of a shortselling scheme significantly discourages pilot firms from engaging in aggressive tax avoidance, in contrast to the findings by Luo et al. (2020). We also find that the negative effect of short selling on tax aggressiveness is more pronounced for firms that have high advertising costs, high institutional holdings, and CEO duality, and are located in regions with weak tax law enforcement. We further reveal that short selling has an indirect effect on tax aggressiveness through the additional external pressure exerted by auditors, media, and financial analysts, and lastly, challenge the main analysis by Luo et al. (2020). Our evidence highlights the monitoring and disciplinary roles that short sellers play in determining the level of corporate tax aggressiveness.

Corporate Reporting, Corporate Governance Mechanisms and Tax Aggressiveness: Evidence from Indonesia

“…The test results showed a significant negative relationship between CEO duality and tax aggressiveness in all industries. These findings did not support Cao et al (2021) and Ezejiofor and Ezenwafor (2021). However, these findings agreed with Chytis et al (2020) and Kolias and Koumanakos (2022), which argued that it would be easier to determine company policy if the CEO also served as the board chairman.…”

“…Meanwhile, Kashanipour et al (2019), Niu et al (2021), and Onyali and Okafor (2018) asserted that companies with a larger percentage of independent directors are less likely to engage in tax aggressiveness. Because the public considers independent boards as specialists capable of mediating conflicts amongst internal managers about decision-making, having a larger number of them enables the control role to be more successful, and the fourth hypothesis is as follows: H4: Independent board has a negative relationship with tax aggressiveness Cao et al (2021) and Ezejiofor and Ezenwafor (2021) showed a significant and positive association between CEO duality and tax aggressiveness since CEO duality increases board-management interaction. As a result, an aggressive tax policy can be promptly accepted and implemented.…”

Does Corporate Social Responsibility Expenditure Influence Tax Avoidance? Evidence from Tanzanian Listed Firms

“…The link between CSR expenditure and tax avoidance has generated scholarly interest and debate. Some argue that firms engaged in CSR activities may be more adept at navigating tax regulations, utilising legal avenues to minimise tax liability (Choi et al, 2017). Conversely, ethical constraints imposed by CSR practices might deter firms from engaging in aggressive tax planning, suggesting a potential negative relationship.…”