Analyst's Coverage,Corporate Tax Avoidance And Debt Financing Costs

Although the tax law in China has been improving,the phenomenon of corporate tax avoidance is widespread.This has raised much scholars' attention and enriched relevant literature.From the traditional point of view,many literatures show that corporate tax avoidance is an important decision-making behavior.By avoiding tax,firms can realize their value and increase shareholders' wealth.However,the latest view of principal-agent theory is that corporate tax avoidance behavior does not necessarily realize firm value.What economical consequences will happen if a firm avoid its due tax? Will there be any impact on corporate finance decisions? This study selects debt financing costs as the breakthrough point and discusses whether corporate tax avoidance has an impact on debt financing costs,this is the first question in this paper.As an important information intermediary,the analyst can play a good external supervisory role,which can also inhibit the opportunism of management.Whether the analyst's coverage can affect the relationship between corporate tax avoidance and debt financing costs is discussed in this paper as the second question.Firstly,this paper summarize the relevant literature at home and abroad about the economic consequences of corporate tax avoidance,the influencing factors of debt financing cost,the corporate governance effect of analyst's coverage,the relationship between corporate tax avoidance and debt financing costs,the relationship between analyst's coverage and debt financing costs.Then the conceptual definition of these three variables is carried out,and the hypothesis of this paper is deduced based on the effective tax planning theory,risk management theory,information asymmetry theory and principal-agent theory.Secondly,the variable design is carried out on the basis of the related literature and the empirical research model of this paper is constructed.Finally,after the data screening,the final selection of 5967 A-share listed companies in Shanghai and Shenzhen stock markets from2010 to 2015 are taken as the research sample.By empirical test,the influence of corporate tax avoidance on debt financing costs is discussed.The analyst's coverage is considered in empirical test for further study.The results show that:(1)Corporate tax avoidance has an impact on debt financing costs,that is,the tax avoidance is positively related to debt financing costs.The higher the tax avoidance degree,the higher debt financing costs.(2)The increase of analyst's coverage caninhibit the positive correlation between corporate tax avoidance and debt financing costs.This paper puts forward relevant policy recommendations as follows:(1)It's important for management to strengthen the financial awareness of the positive correlation between corporate tax avoidance and the cost of debt.(2)Establish and improve the legal system of tax regulation.(3)Strengthen the supervision and inspection of tax authorities,inspection and disciplinary efforts.(4)Establish the analyst evaluation system and promote the development of the analyst industry.