The Effect Of Institutional Investors’ Corporate Site Visits On Corporate Income Tax Avoidance

Corporate tax avoidance is a widespread phenomenon around the world.In China,corporate tax avoidance is also very common.Therefore,corporate tax avoidance has always been an important research topic.Corporate tax avoidance theory has developed rapidly these years from the traditional tax avoidance theory to the agency theory of tax avoidance.In this context,this paper tries to explore an external governance mechanism that can alleviate the agency problems in corporate tax avoidance decisions from an agency theory perspective.In the meanwhile,the rapid development of corporate site visits provides us with a great research opportunity.On the one hand,corporate site visits is playing a more and more significant role in the capital market,which inspires us to consider how corporate site visits can affect the host companies,and during this process,we realize that corporate site visits can be a potential external governance approach to alleviate the agency problem.On the other hand,the disclosure requirements and supervision rules for corporate site visits make the data we need available.In this case,our paper studies the impact of institutional investors’ corporate site visits,as an external force to enhance corporate governance,on corporate income tax avoidance.We investigate the impact of institutional investors’ corporate site visits on corporate income tax avoidance based on a sample of all institutional investors’corporate site visits to A-share Chinese firms listed in the Shenzhen Stock Exchange from 2009 to 2016.This dissertation proceeds as follows.The first part is introduction.Firstly,we introduce the research background and significance of this paper.Secondly,the research contents and methods of this article are briefly described.Thirdly,we introduce research innovations.Finally,we clearly define the connotations and extensions of the following three main concepts involved in this article,that iscorporate income tax avoidance,institutional investors,and corporate site visits.The second section is literature review.In order to learn from the existing researches and to find new research directions,we review literatures on the factors that influence tax avoidance and the economic consequences of corporate site visits.Besides,the existing researches can also provide theoretical support and methodological support for our empirical research.The third part is theoretical analysis and hypothesis development.In this part,we establish the theoretical relationship between institutional investors’ corporate site visits and corporate income tax avoidance,and explain how corporate information disclosure quality and corporate governance affect their relationship.Based on the theoretical analysis,the research hypotheses of this paper are proposed.The fourth part is research design.In this part,we first introduce the sample selection and data sources of this study.Then we define the explained variables,explanatory variables,and control variables in our model.Finally,we construct different models for different assumptions.The fifth part is empirical analysis.Firstly,we introduce the basic characteristics of the sample firms based on the descriptive statistical analysis of relevant variables.Secondly,correlation analysis and multiple regression analysis are used to provide empirical evidence for the three research hypotheses proposed in this paper.The sixth part is conclusions and suggestions.Firstly,based on the results in the previous parts,the conclusions of our empirical research are summarized.Secondly,institutional investors,regulatory agencies,and tax authorities are provided with specific suggestions.Finally,the shortcomings of this study are pointed out.The empirical results of this paper show that institutional investors’ corporate site visits can reduce the level of corporate income tax avoidance,and this negative impact is more pronounced in companies with poor information disclosure quality and companies with poor corporate governance.This paper may have the following innovations.First of all,the empirical results of this paper show that institutional investors’ corporate site visits is also an important factor affecting corporate tax avoidance decision-making,and our research enriches the relevant research on the factors that influence corporate income tax avoidance from the perspective of agency theory.Secondly,this paper empirically proves that corporate site visits is not only beneficial to the visitors,but also can effectively curb management-self-interested corporate tax avoidance.This further deepens our understandings of the usefulness of corporate site visits and enriches the literature on corporate site visits.Finally,we find that institutional investors can obtain key information to identify management rent-seeking behaviors by conducting site visits,thereby reducing the level of corporate income tax avoidance.This indicates that,in addition to institutional investors’ shareholding,corporate site visits is also a major channel for institutional investors to take part in corporate governance.Therefore,this article is a useful supplement to the relevant research on institutional investors’ shareholdings,and has expanded existing research on institutional investors.This study has the following implications.Firstly,for institutional investors,they should take an active part incorporate site visits activities,especially to companies with poor information disclosure quality and companies with poor corporate governance.Secondly,for regulatory agencies,on the one hand,regulatory agencies should continue to nurture all kinds of institutional investors;On the other hand,regulatory agencies should continue to encourage investors to conduct corporate site visits and create an investor-friendly market environment and institutional environment.Finally,taxation bureaus may also use institutional investors’ corporate site visits as an important indicator for tax inspections to improve the cost-effectiveness of tax inspections.