Management Capacity And Tax Avoidance

As a business strategy,reasonable use of tax avoidance will help increase the income of enterprises.But in order to keep more resources in the enterprise,while improving management revenue,companies are likely to carry out radical tax avoidance.This behavior not only undermines the state tax revenue,but also causes a waste of resources and unfair tax environment.China is in a transitional economy,the degree of tax avoidance is not the same when enterprises are facing an unstable environment.The existing literature generally explores the factors that influence the tax evasion and the economic consequences that tax avoidance lead to,but mainly focuses on the factors at the enterprise level.The impact on the management level is limited to the fixed effect of the management and the concern for the ability of management is still rare.This paper aims to study the relationship between managerial ability and corporate tax avoidance,and analyze the impact of different product market competition on the relationship between managerial ability and tax avoidance.In addition,based on China's special institutional environment,the paper studies if there is difference on the impact under different property rights.This research chooses the listed companies in Shanghai and Shenzhen in 2010-2015 as the sample,and uses the method of theoretical analysis and empirical research.Firstly,the model of managerial ability and tax avoidance is constructed.Secondly,the two factors of product market competition and managerial ability are combined to study the influence of product market competition on the relationship between managerial ability and tax avoidance.Finally,the paper divides the sample into groups according to the nature of property to study relate question.Through the regression analysis of full sample,the regression analysis of grouping sample and the robustness test of the main variables,the empirical results of this paper show that:(1)The managerial ability can significantly affect the tax avoidance of the enterprise.Based on considerations of tax cost and reputation risk,the managements with high ability are more able to apply the limited energy to improve the business performance of enterprises,thus reducing the degree of tax avoidance.(2)As an external governance mechanism for supervising and restricting management,product market competition will enhance the operational risk of enterprises and urge managements to strengthen self-restraint to enhance management efficiency.Therefore,the more intense product market competition,the stronger degree negative correlation between managerial ability and tax avoidance.(3)In the product market competition environment,a certain policy support will weaken the role of managerial ability in state-owned enterprises.Non-state-owned enterprises have larger tax avoidance motivation and need the management to make a choice.By contrast,the influence of product market competition on the managerial ability and tax avoidance is more significant in non-state-owned enterprises.Based on the above research results,this paper puts forward some suggestions on how to establish a sound market system of professional managers,expand tax preferential policies and improve the degree of competition in product market.