Tax Avoidance And Stock Price Crash Risk

This paper focuses on the relationship between tax avoidance by listed companies and the stock price crash risk,and explores the mechanisms at play between the two,and further explores the factors affecting the relationship at three levels:internal corporate governance,external monitoring,and heterogeneity of property rights.Taking Chinese listed non-financial companies data from 2007 to 2019 as samples,this paper discusses the impact of tax avoidance behavior of listed companies on the risk of stock price collapse and finds that with the deepening of the degree of tax avoidance,the risk of collapse of the company’s stock price gradually increases.It then empirically investigates the impact of tax avoidance on the release of corporate information,concluding that tax avoidance inhibits the timely release of bad news but not good news,deepening information asymmetry,confirming the management information hiding hypothesis,and thus validating the mechanism by which tax avoidance increases the risk of corporate share price collapse.The relationship between tax avoidance and the risk of share price collapse is then explored by examining the impact of the two moderating variables of shareholding ratio of controlling shareholders and tax regulation.Further distinguishing between property rights,group regressions on the SOE and non-SOE samples finds that the positive relationship between tax avoidance and share price crash risk is significant for non-SOEs,but not for SOEs.In order to ensure the robustness of the result that there is a positive correlation between tax avoidance and share price crash risk and further exclude potential endogeneity bias,this paper replaces the measures of the explanatory variables and still reaches the same conclusion.Besides,this paper uses the online implementation of CTAIS III—third of China Tax Adminstration Information System as a quasi-natural experiment to construct a difference-in-differences model with multiple time periods to verify the conclusion again from an external supervision through a parallel trend test.Based on the findings of the study,this paper makes recommendations for the taxation department,capital market and enterprises: firstly,Tax authorities will continue to strengthen the information construction of collection and administration,improve tax payment credit management,and strengthen tax supervision over non-state-owned enterprises;secondly,the accounting system should be improved,the quality of information disclosure should be improved,the supervision of the capital market should be enhanced and the crackdown on irregularities in disclosure should be increased;thirdly,enterprises should establish a correct view of taxation and controlling shareholders should play a good role in the construction of enterprise internal governance.