Research On Relation Between Incentive Of Executives And Corporate Tax Aggressiveness

In the transitional and emerging market, due to the defect of the tax collection and administration system and related law institutions, as well as the low quality of corporate governance, the aggressive tax behavior is more and more severe. These aggressive tax behaviors will damage the government tax income and the effective distribution of tax resources. Taxation management faces the challenge of new risks. Therefore, it is very important to study the motivation and behavior of corporate tax aggressive.This paper study how the incentive of executives influence the corporate tax aggressive, using the Chinese listed A share companies between 2003 and 2014.Specifically, we first study the relation between the executive incentive level and the tax aggressive. Then we further explore how the property of company, the quality of audit, and the level of regional marketization influence the above relations, respectively. We find that, first, the higher level of executive incentive, the less corporate tax aggressiveness; second, relative to the state-owned enterprises, the executive incentive mechanism is more effective to soften the tax aggressiveness in private companies; third, the higher quality of outside audit, the more effectiveness of the executive incentive mechanism to soften the tax aggressiveness; and finally, in the region of higher marketization, the executive incentive mechanism can be more effective in reducing the aggressive tax problem. In all, the high power incentive of executives can soften the agency problems and reduce the tax aggressiveness.The finding has some implications, that is, designing a high power executive incentive mechanism, improving the quality of audit and continuously improve the level of marketization in China, have positive effect on the corporate governance.