A Study On The Impact Of Corporate Tax Avoidance On Capital Structure

The tax avoidance behavior of modern companies have already become an undeniable truth, while current researches on the influence of this behavior mainly focus on the effect caused by tax avoidance to the firm value, the value of cash, investment efficiency and so forth, and rarely had researches exploded the the relation between tax avoidance and corporate capital value. On the other hand, non-debt tax shields are normally regarded as a important factor that influence the capital structures in past researches, but the definitions of them mainly focus on the shield effect of fixed asset depreciation or amortization of intangibles, which means that tax evasion can be regarded as a non-debt tax shield theoretically and therefore can be put into the research of the relationship between tax avoidance and corporate capital level.Then comes to the central issue of this thesis is that does corporate tax avoidance affects capital structure? By using a sample data of Chinese nonfinancial A-stock listed companies from 1999 to 2014, this paper examines the impact of tax avoidance on capital structure. Empirical results show that corporate tax avoidance and debt ratio was negatively correlated. Since tax avoidance has played the role of non-debt tax shields, which had significant substitution effects on debt interest tax. Specifically, when considering the corporate governance mechanism, the substitution effect of the tax avoidance was hampered because of the imperfect of corporate governance mechanism. The above conclusions enrich the research of tax avoidance’s potential consequences and its impact path.Moreover, the conclusion of this paper also contact and contributed to a better understanding the relationship among tax avoidance,capital structure and corporate governance.