Research On The Impact Of Financing Constraints On Corporate Tax Avoidance

The global economy is currently in a downturn period,and the epidemic is still developing,the domestic real economy is facing more difficult and complex challenges,with a significant slowdown in growth.In this environment,the overall financing environment in China is poor,and many enterprises are facing problems such as difficulties in external financing.When external financing is hindered,enterprises will rely more on internal funds for business planning and investment decisions,and tend to increase their internal capital stock by reducing expenses.Income tax is an important cash expense for Chinese resident enterprises,and tax avoidance activities can help enterprises save a huge amount of cash expenses to alleviate the capital shortage problem,so enterprises may implement tax avoidance behaviors to alleviate the problems such as capital constraint caused by financing constraints.The impact of financing constraints on corporate tax avoidance behavior studied in this paper is an exploration of corporate tax avoidance motives,which can enable the relevant departments to better understand the specific reasons behind corporate behavior and help them to introduce effective policies to help enterprises alleviate their difficulties and then support the further benign and healthy development of Chinese enterprises,which has important practical significance.This paper directly conducts an in-depth study on the impact of financing constraints on corporate tax avoidance.In terms of heterogeneity analysis,three factors,namely marketization process,internal control quality and institutional investors’ shareholding,are selected for analysis,and the specific mechanism of the impact of financing constraints on corporate tax avoidance is studied in depth,which enriches the existing literature and has certain theoretical significance.This paper conducts a combined theoretical and empirical study on the impact of financing constraints on corporate tax avoidance,taking the A-share private listed companies in China from 2009-2018 as the research sample.In the theoretical analysis part,this paper analyzes the reasons for the formation of financing constraints and the impact of financing constraints on corporate tax avoidance behavior based on three main theories: information asymmetry theory,optimal order financing theory,and effective tax planning theory,and proposes four research hypotheses in this paper.In the empirical research part,firstly,this paper tests the influence of financing constraints on corporate tax avoidance behavior by establishing a fixed-effect OLS model;secondly,this paper analyzes heterogeneity in three aspects: marketization process,quality of corporate internal control and shareholding ratio of institutional investors;finally,this paper tests the two influencing mechanisms of financial distress and marginal value of cash,and also conducts a robustness tests to ensure the reliability of the research results.The findings of this paper suggest that financing constraints promote corporate tax avoidance and that firms with higher levels of financing constraints avoid taxes to a greater extent.Further heterogeneity analysis concludes that the positive contribution of financing constraints to corporate tax avoidance is dampened in the presence of higher marketization processes,higher quality internal controls,and a higher percentage of institutional investor ownership.The analysis of the influence mechanism concludes that the effect of financing constraints on firms’ tax avoidance behavior is transmitted through two mechanisms: the financial distress mechanism and the marginal value of cash mechanism。Finally,based on the comprehensive theoretical analysis and empirical results,this paper proposes the following recommendations for the development of enterprises in China: first,encourage the development of small and medium-sized financial institutions to alleviate the financing difficulties of private enterprises;second,promote the development of institutional investors and cultivate the concept of long-term investment and supervision;third,deepen the "tax-bank interaction" and promote the sharing of multiparty information;fourth,strengthen the implementation of internal control and improve the quality of corporate internal control;and fifth,combine the financing constraints to lock in tax-avoidance risk enterprises in advance.