The Impact Of Official Corruption On The Company’s Tax Burden And Company’s Value

Foreign researches have shown that the political ties play an important role forcompanies’ development which impacts all aspects of their business. Political ties couldbe divided into two categories: one is legal that belong to the background ofgovernment studied by most researchers; the other is illegal named official corruption.Revenue is an important fiscal policy for a country. Chinese officials have greatdiscretion in the tax implementation which means government officials control largepower and decision space over how much preferential tax policies companies couldenjoy. As tax burden is a significant expenditure to a company, so there exists themotivation for the company to bribe government officials in order to reduce their taxburden.Hiring excellent external auditors to conduct forensic financial reporting is an mainpart of modern corporate governance, as well as an important factors to affectcompanies’ valve. However when auditor makes choice, which is subject to government,the management function will be affected. Presently political tie affects the value ofcompany mainly by “Hand of helpless” and “Hand of plunder” of government. But theacademia hasn’t got the views of the united, one considers it increasing the value ofcompany, the other is just the opposite. Then whether corruption that make briberycompany and government officials more closely affects the value? If so, improve it orreduce it? Furthermore, will corruption affect the company on selecting auditor? Whatabout the influence of corruption on the function of company management by externalaudit?In order to explain the above problems, this paper empirically analyses that whataffect corruption will make to company’s tax burden and the relationship amongofficial corruption、selection on auditors and the company’s value based on the corruptprovincial and ministerial government officials disclosed in the years from1993to2008and the listed company refer to the officials involving above. And this paper isconstituted by six chapters: the first chapter of this paper puts forward the backgroundand significance, establishes the basic framework of papers, and points out that thelimitations and innovation of this paper; the second chapter put together academicliterature that have researched related to the content, then analyzes the research statusfrom domestic and abroad; the third chapter introduces institution background of the official’s corruption and theory of rent-seeking for authority, the on the basis expoundsthe related theory of foundation; the forth Chapter infers the hypothesis empirically,first set the empirical research model, then explains related variables; the fifth Chapterlists descriptive statistics on the data, then empirically tests the effect of official’scorruption on the tax burden company value, and finds that compared to the companywithout bribing, bribery companies’ effective tax rate appears lower and the companyvalue seems significantly higher in a short time; the sixth Chapter reviews andsummarizes research conclusion, and propound some suggestion for further research.