Corporate Tax Avoidance And Innovation Quality

Based on the data of A-share listed companies in 2004-2018,this paper discusses the consequences of tax avoidance from the perspective of innovation.First of all,this paper uses innovation input and patent quantity as the proxy variable of innovation level,and finds that the tax avoidance behavior of enterprises can increase internal cash flow,so as to increase the input of innovation,and the total output of innovation as well.Secondly,considering the phenomenon of "emphasizing quantity and neglecting quality" in China's innovation market,this paper uses the proportion of invention patent quantity to the total patent quantity to measure the quality of innovation.We find that the quality of innovation of enterprises that undertake tax avoidance is lower.The implementation of tax avoidance will increase business risk,resulting in lower risk tolerance of technological innovation.The management will adjust the innovation strategy,reduce the proportion of investment in invention patents with high technological risk,and finally the innovation quality will be damaged.This paper further distinguishes the enterprises with high risk and low risk,and finds that the tax avoidance behavior damages the innovation quality more in the enterprises with high risk,which provides further evidence of the inference that the tax avoidance behavior damages the innovation quality due to increased risk.This paper also examines the moderating effect of financing constraints,the nature of property rights and institutional investors,and finds that tax avoidance behavior only damages innovation behavior in companies with low financing constraints,implying that cash flow saving plays a leading role in companies with relative high financing constraints.And private enterprises are weaker in risk tolerance,therefore tax avoidance behavior has a greater impact on innovation quality of those enterprises.Those enterprises with higher institutional investors' shareholding have higher level of corporate governance,and therefore lower possibility of shortsightedness of management and higher innovation quality.