Stock liquidity and corporate tax avoidance

• 成果类型: Article
• 署名作者: Chen, Yangyang; Ge, Rui; Louis, Henock; Zolotoy, Leon
• 署名单位: Hong Kong Polytechnic University; Shenzhen University; Audencia; Pennsylvania Commonwealth System of Higher Education (PCSHE); Pennsylvania State University; Pennsylvania State University - University Park; University of Melbourne
• 刊物名称: REVIEW OF ACCOUNTING STUDIES
• ISSN/ISSBN: 1380-6653
• DOI: 10.1007/s11142-018-9479-6
• 发表日期: 2019
• 页码: 309-340
• 关键词: HEDGE FUND ACTIVISM; institutional investors; financial constraints; large shareholders; cross-section; governance; firm; incentives; OWNERSHIP; price

摘要

We show that firms with higher stock liquidity engage less in extreme (i.e., overly aggressive or overly conservative) tax avoidance. The effect of stock liquidity on tax avoidance is economically meaningful and robust across alternative measures of tax avoidance and stock liquidity. The findings also hold after controlling for potential endogenous effects. We further document that the effect of stock liquidity on tax avoidance is amplified for firms with high proportions of activist shareholders and attenuated for firms with high levels of stock price informativeness. Overall, our findings suggest that stock liquidity mitigates extreme tax avoidance by enhancing shareholders' monitoring over firm management.