Managerial Ability,Tax Avoidance And Economic Consequences

Since the emergence of tax,taxpayers began using various methods to avoid taxes.Although the national tax authority has been through a variety of methods to improve taxpayer compliance,but tax uncompliance issues never stop.In different ages,different countries have tax erosion problems.Enterprises tax avoidance behavior induces great interest in academia,especially in the field of accounting,finance and management.Managerial ability is an important element in the capital market.Managerial ability is very important for the company’s financial,business,investment and tax planning strategy(Bertrand and Schoar,2003).So,managerial ability will affect enterprise’s tax avoidance.This paper discusses the managerial ability effect on enterprises’ tax avoidance based on the Chinese setting.Based the relation of the managerial ability and tax avoidance,this paper furtherly studies the consequences of managerial ability and tax avoidance(1)managerial ability,tax avoidance and stock price crash,(2)managerial ability,tax avoidance and enterprise value.This paper includes two parts: the introduction and the main body,each part content is as follows:Chapter 1 is introduction.In the introduction it introduces background,research purpose and significance,related concepts,research methods and ideas,the structure of the paper and possible contribution.There are five chapters in the main body.Chapter 2 is the basic theory and literature review.According to the topic and research content,this chapter mainly reviews the corporate tax avoidance theory and stock price crash risk theory.Through the review and analysis of the basic theory,it provids a solid foundation for further research.Literature review is mainly divided into three parts:(1)The chapter reviews the managerial ability literature and,points out that the managerial ability is very important to enterprise’s investment behavior,accounting behavior,financial behavior and the tax planning behavior.(2)This chapter reviews the determinants and consequences of tax avoidance.Through the analysis,this paper finds the possibility void to furtherly study.(3)This chapter reviews the determinants and consequences of stock price crash risk,which provides literature support for the research contents of this paper.(4)This chapter summarizes and analysis the literature review,and gives the research target and content of this paper.Chapter 3 is the study on the managerial ability and the tax avoidance.First of all,through the theoretical analysis to know how the managerial ability impact tax avoidance,then the chapter gives the hypothesis.The second,the chapter establishes model to empirically test the relation between managerial ability and tax avoidance.Furtherly,this chapter test the relation between managerial ability and tax avoidance in different setting such as different nature of property right,different investment opportunities,different operating risk and different performance level situation,which deepen and expand the study of managerial ability and tax avoidance.Chapter 4 is the study on managerial ability,tax avoidance and stock price crash risk.Firstly,this chapter respectively studies the effect of the managerial ability on stock price crash risk and the effect of tax avoidance on stock price crash risk.Secondly,this chapter studies the moderating effect of the managerial ability on tax avoidance and stock price crash risk.Thirdly,this chapter studies the mediating effect of tax avoidace between the managerial ability and stock price crash risk.Chapter 5 is the study on managerial ability,tax avoidance and enterprise value.Similar to chapter 4,firstly,this chapter respectively studies the effect of the managerial ability on enterprise value and the effect of tax avoidance on enterprise value.Secondly,this chapter studies the moderating effect of the managerial ability on tax avoidance and enterprise value.Thirdly,this chapter studies the mediating effect of tax avoidace between the managerial ability and enterprise value.Chapter 6 is conclusion and policy recommendations of the paper.It summarizes the research conclusion,limitations and the direction of further research.Finally,it puts forward policy suggestions.In this paper,the main research conclusions are as follows:First,the paper finds the relationship between managerial ability and the tax avoidance is negative,that is to say that the higher the management ability,the higher the effective tax rate and the cash effective tax rate,the lower the book-tax difference and DD_btd.Furtherly,the paper studies the relation between the managerial ability and tax avoidance in 4 kinds of setting.(1)In the different finally control right.whatever state-owned enterprises or non-state-owned enterprises,the relation between the managerial ability and tax avoidance is the same.The study results suggest that if managerial ability is high,the CEOS(CFOS)would cherish their reputation.Because of the great direct and indirect costs from the tax avoidance behavior,once the management was found to carry out the tax avoidance,management reputation must be affected.In order to have stronger competition ability and better long-term returns in the professional managers market in the future,the management will put more energy and effort into the normal production and business operation activities to create more profits and value for enterprise,so they likely think tax avoidance strategy as a suboptimal investment activities.(2)In the different investment opportunities setting.Compared with the effect of managerial ability on tax avoidance in the low investment opportunities,the effect of managerial ability on tax avoidance in the high investment opportunities is more pronounced.That is to say that the higher managerial ability the fewer tax avoidance activity.(3)In the different operating risk setting.Similarly,Compared with the effect of managerial ability on tax avoidance in the low operating risk,the effect of managerial ability on tax avoidance in the high operating risk is more pronounced.That is to say that the higher managerial ability the fewer tax avoidance activity.(4)In the different performance levl.Compared with the effect of managerial ability on tax avoidance in the low performance level setting,the effect of managerial ability on tax avoidance in the high performance level is more pronounced,which means the management put more effort and resource into the operating activity,not into tax avoidance activity.Second,the paper finds:(1)the relationship between the managerial ability and stock price crash risk is negative,which means the higher managerial ability the lower stock price crash risk.(2)The relationship between the tax avoidance and stock price crash risk is positive,which means the greater tax avoidance the higher stock price crash risk.(3)The paper doesn’t find the moderating effect of managerial ability on the relation between tax avoidance and stock price crash risk.From robust test,the relation also does not exist.Furtherly,the paper tests the mediating effect of tax avoidance on the relation between managerial ability and stock price crash risk.Through the model of the mediating effect,the paper finds the mediating effect of tax avoidance is existence between managerial ability and stock price crash risk.In the robust test,the paper finds that the effect of managerial ability on the stock price crash risk is long-term and sustainable.But the effect of tax avoidance on the stock pric crash risk is not long-term.From the regression result,the effect of tax avoidance on the stock price crash risk only can predict the next year.Third,the paper finds:(1)the relation between the managerial ability and enterprise value is positive,which means the higher managerial ability the higher enterprise value.According the estimating,if the managerial ability improves 1% standard deviation,the net income would be improved ￥5015725,which means the effort and resource putted into the operating activity would make much great earnings to enterprise.(2)The relation between the tax avoidance and enterprise value is negative,which means the greater tax avoidance the lower enterprise value.(3)Managerial ability has some certain moderating effect on the relation between the tax avoidance and enterprise value.But from robust test,the moderating effect may not so strong.In the furtherly studying,the paper finds the mediating effect of tax avoidance is existence between managerial ability and enterprise value.In this paper,the possible contribution may be embodied in the following two aspects:1.It mainly focuses on the managers’ characters(such as gender,education et al.)effect on the tax avoidance in the study field of managerial ability and tax avoidance.According to the Demerjian et al.(2012)method this paper quantifies the managerial ability,and based on Chinese listed companies data tests the relation between the managerial ability and tax avoidance.Furtherly,the paper tests the effect of managerial ability on tax avoidance in different equity setting,different invest opportunity setting,different operating risk setting and different performance level setting.2.The paper puts the managerial ability,tax avoidance and stock price crash risk into the same research framework.It studies the effects of managerial ability and tax avoidance on stock price crash risk,respectively,and it discusses the moderating effect of managerial ability on the tax avoidance and stock price crash risk.It also studies the mediating effect of tax avoidance between the managerial ability and stock price crash risk.Similarly,the paper studies managerial ability,tax avoidance and enterprise value and put them into the same research framework.Furtherly,the paper also studies the moderating effect of managerial ability on the tax avoidance and enterprise value,and the mediating effect of tax avoidance between the managerial ability and enterprise value.