Equity Pledge Of Major Shareholders And Corporate Tax Avoidance

In recent years,with the gradual improvement of equity pledge system,the operation of equity pledge has become more convenient and the cost is relatively low.Major shareholders still have the right to operate and manage corporate affairs and the right to vote after the pledged stock is incorporated into the capital,which is indeed a good financing method when shareholders and the company are facing financial difficulties.But when the stock price falls,if the shareholder fails to make up the pledged value or redeem the stock in time,the pledgor has the right to forcibly dispose of the pledged equity,and the major shareholder will lose his control over the company.Therefore,after equity pledge,stabilizing stock price becomes the fundamental measure for major shareholders to restrain the risk of control transfer.Tax evasion Retains part of the capital that needs to be turned over to the enterprise for its own development,which can reduce the tax burden of the enterprise,substantially improve the performance of the enterprise in the long run,stabilize the stock price and restrain the risk of control transfer.In addition,as an important financial behavior decision of enterprises,tax avoidance behavior is not only affected by the macroeconomic policy environment,but also has great reference value in the behavior decision information of peer enterprises.Based on the above background,this thesis studies the following issues :(1)whether there is peer effect in corporate tax avoidance behavior;(2)Whether the major shareholder after the pledge of equity will take the way of tax evasion to stabilize the stock price,and whether the peer effect will promote the corporate tax evasion behavior after the pledge of equity;(3)Whether enterprise value decreases after equity pledge,and whether tax evasion can help alleviate the decline of enterprise value brought by equity pledge.This thesis first defines the concepts of equity pledge,tax evasion and peer effect,and then sorts out the domestic and foreign literature on equity pledge,tax evasion and peer effect.Then,based on information theory,social learning theory and other theories,this thesis proposes the research hypothesis and constructs a regression model.Taking the annual data of China’s Ashare listed companies from 2011 to 2020 as samples,this thesis conducts multiple regression analysis and robustness test for the relationship among equity pledge,tax evasion and peer effect.Finally,heterogeneity analysis is further conducted based on the stock market cycle,the shareholding proportion of the largest shareholder and the proportion of independent directors.After research and analysis,this thesis draws the following conclusions: First,there are regional peer effect and industry peer effect in tax avoidance behavior of enterprises,and the regional peer effect is greater than the industry peer effect.Second,equity pledge of major shareholders will promote the tax evasion behavior of enterprises.In addition,the peer effect will strengthen the positive effect of equity pledge on corporate tax avoidance behavior.Third,equity pledge of major shareholders will reduce the long-term performance of enterprises,and corporate tax evasion can help alleviate the negative impact of equity pledge on corporate performance.Fourthly,the positive effect of equity pledge by major shareholders on corporate tax evasion is more significant in bear market years and enterprises with a higher proportion of the largest shareholder and a lower proportion of independent directors.Finally,this thesis puts forward some suggestions from the government and enterprises according to the research conclusions.On the one hand,government departments should promote the construction of multi-level capital market according to market needs,provide targeted financing services for different types of enterprises,and avoid systemic risks brought by large-scale equity pledge.Tax regulatory authorities should also pay close attention to the peer effect of enterprises’ tax avoidance behaviors,improve relevant systems,strictly supervise and correctly guide enterprises’ behavior decisions,optimize the business environment and stimulate market vitality.On the other hand,enterprises should pay close attention to the situation of equity pledge of shareholders,avoid the negative impact of equity pledge on enterprises,and flexibly use diversified financing channels to solve financial difficulties.At the same time,enterprises should be good at learning the relevant decisions of enterprises with similar institutional environment,improve the legality and compliance of enterprises’ tax evasion behavior,and reduce the risk of being audited.