Research On The Impact Of Internal Salary Gap Among Executives On Tax Avoidance In Enterprises

Tax avoidance is a double-edged sword.This behavior can generate profits by saving tax expenses,but also has high potential costs that can bring losses to the enterprise.It is the result of executives carefully weighing the pros and cons of all parties.Therefore,executive incentive measures can affect the tax avoidance behavior of enterprises.Based on this,this article analyzes the impact of the salary gap between CEO and VP level(deputy general manager level)executives on corporate tax avoidance behavior from the perspective of executive compensation gap.Based on tournament theory,prospect theory,and other related theories,this article uses data from 3364 A-share listed companies in Shanghai and Shenzhen from 2008 to 2020 to empirically test the impact of the salary gap between CEOs and VP level executives within Chinese enterprises on their tax avoidance behavior.The results show that:firstly,the salary gap between CEO-VP level executives significantly suppresses the tax avoidance behavior of Chinese enterprises;Secondly,the salary gap of CEO-VP level executives in state-owned enterprises has a significantly stronger inhibitory effect on tax avoidance than that of non-state-owned enterprises.Among state-owned enterprises,the salary gap of CEO-VP level executives in central enterprises has a significantly stronger inhibitory effect on tax avoidance than that of non central enterprises;Thirdly,in non-state-owned enterprises,the salary gap of CEO-VP level executives in non family owned enterprises has a significantly stronger inhibitory effect on tax avoidance than in family owned enterprises;Fourthly,in family businesses,when the CEO is a non family CEO,the salary gap of CEO-VP level executives has a significantly stronger inhibitory effect on tax avoidance than when the CEO is a family CEO.After the robustness test and endogenous test,the relevant conclusions are still valid.Further research has found that financing constraints,corporate social responsibility,and true earnings management(cost manipulation)are mediating variables in the relationship between CEO VP level executive compensation gap and tax avoidance.The research in this article helps to expand the understanding of the factors influencing tax avoidance,improve the understanding of the incentive effects of internal executive compensation gaps in various types of property rights enterprises,and enrich the research on the transmission path of executive compensation gaps on tax avoidance incentive effects.