Research On Influence Of The Listed Firm’s Tax Avoidance Upon Its Capital Structure

As one of the most significant research branches of modern company finance,the capital structure has been paid much attention by many researchers.From MM theory to the latest control power and capital structure theory,a lot of literature has discussed into the relationship of corporate debt policy and tax policy.On the one hand,shareholder wealth may be maximized by debt financing,as it is tax preferred;on the other hand,as a kind of non-debt tax shield,the enterprise can reduce the cash expenditure of the enterprise through the tax evasion activities to maximize the shareholder’s benefit.There are in-depth and extensive discussion on the tax policy and corporate debt financing strategy among scholars at home and abroad.But there are few researchers studying how and how much tax evasion activities impact debt financing and leverage of firms.This paper probes into the influence of the tax evasion activities of listed companies on the capital structure from both theoretical and empirical aspects based on the previous research.This paper takes the A shares of listed firms from 2007 to 2016,which is from the China’s two stock markets of Shanghai and Shenzhen,as the research sample.To study the influence of tax evasion activities on the capital structure of listed companies,this paper uses the method of combination of theoretical analysis and empirical analysis.The study finds that there was a significant negative correlation between the degree of tax evasion and the debt ratio of listed firms.And there is a significant difference of the degree of tax evasion and its influence on the leverage for firms among different industries and ownerships.Moreover,it is also found that there is a negative correlation between the degree of tax evasion of listed firms and the adjustment of dynamic asset-liability ratio,which further illustrates that tax avoidance has substitution effect on tax-shield causing by debt financing.