Research On Institutional Background, Tax Avoidance And Value Of Cash Holdings

Marreli (1984), Kreutzer and Lee (1986) brought the individual tax avoidance behavior into the enterprise behavior and opened the first of its kind of the study on the enterprise tax avoidance. The early researches on tax avoidance of enterprises mainly study the influence factors of tax avoidance from the angle of enterprise characteristics, including the scale of enterprises, the opportunity of growth and the resources of the enterprise. However, these researches have neglected the most important characteristic of the modern enterprise--the separation of ownership and control. Until Slemrod (2004), Chu Chen (2005), Slemrod Crocker (2005) and others included tax avoidance into the framework of the principal-agent theory, related researches on tax avoidance were gradually expanded. Since then, there have emerged a large number of researches on tax avoidance. However, what the impact of tax avoidance on the value of the enterprise has not been unanimous conclusion. The main reason is that there are many influence factors of the enterprise value, which interfere with the influence of tax avoidance. The direct economic effect of tax avoidance is to reduce the cash expenditure and reduce the cost of the use of cash. Therefore, this paper will, under the framework of trust agent theory, study the effect and path of the tax avoidance on the value of corporate cash holding from the direct economic consequences of tax avoidance. It has important theoretical significance and practical significance for the analysis of the influence of corporate tax avoidance on enterprise value.This study takes A shares of non-financial listing corporations of 2008-2014 from China's two stock markets of Shanghai and Shenzhen as a sample, using the principal-agent theory, signaling theory, corporate governance theory and tax avoidance cost theory, and uses the research paradigm of normative analysis, theory model and empirical method with the methods of qualitative analysis and quantitative analysis. The topic of "institutional background, tax avoidance and cash holding value" is studied from three aspects as follows:one is the effect of tax avoidance on cash holding value, in order to study whether the tax avoidance can effect cash holding value. Two is the moderate effect of system background in the effect of tax avoidance on cash holding value, in order to examine whether and how the institutional factors constraint the effect of tax avoidance on cash holding value; three is how tax avoidance have impact on cash holding value, in order to reveal the path of tax avoidance affecting the value of corporate cash holdings. This study has important theoretical and practical significance on improving the research of tax avoidance behavior under the framework of principal-agent theory. First, it will be helpful to the analysis of the impact of tax avoidance on the enterprise value; the second, it will be helpful to reveal how tax avoidance influence corporate cash holding value; third, it will be helpful to the study of institutional factors in tax avoidance affecting the value of corporate cash holding; fourth, it will be helpful to standardize enterprise tax avoidance behavior to enhance the value of cash holdings.The innovations of this research are as follows:first, from two aspects of correlation and reliability, the tax avoidance measurement method is determined. The measurement of tax avoidance is not uniform, and it is divided into two categories:the effective tax rate and the tax difference method. These two methods have their advantages and disadvantages. This article carries on the analysis of the measurement of tax avoidance from two aspects of relevance and reliability and finds that the tax difference method with elimination of earnings management has the highest reliability; second, the article takes cash holding value as a "bridge" and study the effect of tax avoidance on enterprise value. In the past, the research on the economic consequences of tax avoidance is mostly based on the enterprise value. However, there are many factors influencing the enterprise value, which cannot lead to the uniform conclusion. Direct economic consequence of tax avoidance is to reduce the cash expenditures and cash holdings is part of the value of the enterprise. Therefore, this paper study the influence of tax avoidance on the enterprise value through the cash holding value, "the middle bridge"; third, this study combines principal agent theory with signaling theory, and opens the "black box" of tax avoidance affecting the value of cash holdings. In the past, the effect of tax avoidance on the agency behavior was studied only in the view of tax avoidance. This study combines principal agent theory with signaling theory, and reveals the path of tax avoidance affecting corporate cash holdings value from two aspects of the agency problem and signal transfer; fourth, by using the system analysis method, this article studies how institutional factors moderate the effect of tax avoidance on corporate cash holding value. This research selects multiple institutional factors greatly affecting enterprise tax avoidance, including internal institutional factors and institutional factors, according to the theory of corporate governance, system analysis method, and does empirical research on the moderate effect of tax avoidance affecting the value of cash holdings, to reveal how the institutional background play the moderating role of tax avoidance affecting the value of cash holdings.