The Study Of China's Listed Company's Equity Incentive And Tax Planning

Nowadays,the economic develop rapidly,under the background,market economy system is improving,tax is further studied,competition is increasingly fierce,enterprise' s development is more transparent,the evolution of market economy are becoming ever more obvious,managers are focus on how the enterprise can develop in the fierce competition environment,of course,the measures how to enhance the competitiveness of enterprises,is according to every enterprise industry and different development phase,but the tax issue is every enterprise to consider.So how to gain tax revenues effectively follow the current tax law,the issue is common concerned to managers.Based on the principal-agent theory,senior managers will maximize their own interests.Tax planning is a long-term behavior,itself has a big risk,tax-planning earnings has great uncertainty,as the change of economic environment executives face the risk of tax-planning failure.Rational manager without appropriate incentives will avoid risk of tax planning,and the best way is not.The cost of the tax planning occur in current period,result in an increase cost of the current period,which have certain negative effect on the executives' performance,executives hope that accounting profit is bigger,transfer the signals to shareholders that they work hard,however,tax planning will reduce taxable income,although the taxable income and accounting profit are different,but has certain positive correlation,which caused the conflict between tax planning and financial reporting.According to principal-agent theory,the will of the tax planning is not strong,and conflicts intensified the information asymmetry between the executives and shareholders.According to contract theory,the optimal contract is that the principal and agent share the risk together,and allow the agent to share the rest of the gains.That would require shareholders establish the supervision mechanism and incentive mechanism adapted with the corporate governance structure,supervision mechanism,from the angle of rigid rules,constraint the business scope and decision-making of the senior managers,to ensure that executives do not abuse of power,which can't fundamentally increase the will of executive to work hard for the value of the company growth.Incentive mechanism can relieve the contradictions of the agency conflict to a certain extent,short-term incentives,staff salary incentive encourage managers to work for company benefit maximization in a short-term,the short-term incentives is effective,but will cause the short-sighted behavior of executives,tax planning is a long-term and global decision-making behavior,short-term incentive has non-obvious influence on the behavior of tax planning.Equity incentive as a long-term incentive means,to unify the interests of executives and shareholders interests,executives can enjoy the success of residual income,not only make the executive do the things for corporate profits maximization during his tenure,but also executive can share the profit of long-term decision when he retired.tax planning in the long-term is in line with the long-term of equity incentive,equity incentive encourage manager reduce the short-term behavior,consider the global profit,planning for the company,s long-term interests,equity incentive is the inner motive power of executives for tax planning.Scholars at home and abroad study on executive and tax management behavior,through the summary can be found:(1)research is generally accepted that revenue management behavior can increase the value of the company.The behavior can reduce the company's tax risk,realize the increase of the value of the company,and the purpose of tax planning is realize the maximization of the tax revenue,can increase the value of the company to a certain extent,but foreign literature are not distinguish between tax administration behavior or tax avoidance of tax planning,there is less research on the relationship between the tax planning and executives equity incentive.(2)executives characteristics are the important factors that affect tax planning,the literature is on the basis of principal-agent theory and effective tax planning theory,analyzes the executive's influence on the tax planning,rational senior managers will be choose not to tax planning because of the risk,which is contract to the will of the shareholders,to equity incentive to executives,which has significant positive influence on tax planning.(3)the behavior of tax planning is hidden,the measure of the degree of tax planning,scholars both at home and abroad would like to choose tax rate method,a small number of scholars will choose book-tax difference to measure the degree of tax planning,logically,book-tax difference method is more accurate.According to agency theory,economic man hypothesis and property right system,analyze the correlation of executive equity incentive and tax planning with book-tax difference method.This is the innovation and the meaning of this article.Through the study of financial data of listed companies in China:shareholders equity incentive can promote the tax planning behavior of executives,which is significantly positive correlated.This conclusion is verified in this paper,combined with the conclusion,this paper puts forward the shareholders should be combined with the actual needs,equity incentive to executives,prompting executives to choose tax planning actively,make the right decisions in order to the long-term interest of the company from the company's overall interests and long-term interests,maximize the value of the company.To carry on the equity incentive,of course,would increase the cost,shareholders should seek pareto optimality between incentive cost and tax revenue.