Family Business Governance Structure, Executive Contract Incentives, And Tax Incentives

Under the condition of socialist market economy,tax revenue has become the main form of fiscal revenue in China.For a long time,it has become a common phenomenon for enterprises in various countries to implement tax aggressive behavior in order to reduce the outflow of economic benefits,which has also become the focus of the control of tax collection and management departments in various countries,and has gradually become a hot issue in academic research.Nowadays,with the rapid development of social economy and the increasingly fierce competition in the market,enterprises increasingly hope to reduce costs to reduce the actual cash outflow.In view of the lag of improving tax laws and regulations in China,tax avoidance has become one of the means of implementation of many enterprises to achieve this goal.Family firms not only have relatively special governance structure,but also pay income tax cash outflow directly reduces family wealth distribution.They will have stronger tax avoidance motivation than non-family firms.Family business is now a major proportion of the enterprise organizational form,so it is necessary to study the impact factors of its tax aggressiveness.This paper locates in family firms,chooses the data of A-share Family Listed Companies in Shanghai and Shenzhen motherboard market for 8 years from 2010 to2017 as the research sample.Through literature research,normative research and empirical research,this paper explores the relationship between the governance structure,executive contract incentives and tax aggressiveness of family firms.It mainly carries out from the following three aspects:First,the representative ownership structure,board size and duality of chairman and general manage in the governance structure are chosen to study their impact on the tax aggressiveness of family firms.Secondly,we choose compensation incentive and equity incentive in executive contract incentive to study their impact on tax aggressiveness of family firms.Thirdly,we study the changes of the impact of three aspects of governance structure on the tax aggressiveness of family firms after executive contract incentives.The results show that: firstly,in terms of governance structure,the more perfect the governance structure of family firms in China,the lower the tax aggressiveness.In family firms where equity itself is relatively concentrated,the more concentrated equity,the lower the tax aggression level;the larger the board of directors,the more restrained tax aggressiveness;and the combination of chairman and general manager will enhancethe tax aggressiveness of family firms.Secondly,in terms of executive contract incentives,it is found that executive compensation incentives do not promote family firms to conduct more radical tax avoidance means,there is no obvious relationship between them;while executive equity incentives significantly improve the tax aggressiveness of family firms.Thirdly,when family firms offer equity incentives to senior executives,the negative impact of equity concentration on tax aggressiveness is weakened,but the restraining effect of board size on tax aggressiveness is strengthened.At the same time,the positive effect of two-duty unification on tax aggressiveness is also strengthened.The conclusion of this paper provides a certain direction for improving family firms governance to reduce its tax aggressiveness.The higher the concentration of ownership in family firms,the more risk-averse the controlling shareholders will be.As the owners of enterprises,the family members will pay more attention to the reputation,honor and long-term development of enterprises.They do not want to be exposed and punished for the failure of taking aggressive tax measures,and bring irreparable heavy losses to business.Therefore,they will try to avoid risks and have lower aggressive tax revenue degree.Expanding the size of the board of directors will enable the board to have more professional experiences and experience,more resources and skills,more effective supervision and balance between enterprises and management,and reduce management's aggressive tax speculation.The duality of chairman and general manager will over-extend the power of CEO,reduce the independence and the effectiveness of supervision of the board.The chairman,who is also the general manage will probably seek personal gains through power and take tax aggression to seize their own benefits.Equity incentives for executives bring them to the shareholder level,so that they can share real benefits from tax avoidance benefits arising from tax aggression,and management is willing to take a certain degree of risk for this.Given a certain equity to senior managers,it is hoped that managers can use their own abilities to better serve the enterprise,and are willing to let senior managers get their actual performance benefits.Correspondingly,the family firms controllers will also reduce their aversion to tax avoidance risk.The management shareholding enhances the tax avoidance tendency of enterprises,and the expansion of the board of directors will strengthen the identification and supervision to restrain tax aggression.The duality of chairman and general manager with the increase of the proportion of senior managers' shareholding will make the position of management more stable and power more centralized,which not onlyincreases the opportunistic motivation of senior managers to maximize their own interests,but also improves their ability to implement tax aggression.For family firms,the enterprise controllers should correspondingly increase the proportion of their own or family's shares and the importance of the enterprise to the family.At the same time,they should choose more professional ethics and skills to expand the size of the board of directors,and separate the duty of chairman and general manager,so as to improve the governance structure of family firms.In addition,when giving equity to senior managers,we should consider the positive and negative impacts,determine the appropriate incentive mode and equity ratio,build a high-quality internal regulatory body,strengthen the professional quality of employees,and avoid tax aggression while enhancing their work enthusiasm.Correspondingly,for the national tax collection and management departments,when conducting tax inspection,they can focus on the audit of family firms with imperfect governance structure and high proportion of executive shareholding.Such companies are likely to have a greater tendency to avoid tax.At the same time,the government should also urge companies with bad governance to improve their own governance and reduce their aggressive tax space.