An Empirical Analysis Of The Impact Of Political Connections, Quality Of Information Disclosure On Income Tax Cost

Because of our unique background of system, most listed companies are state-ownedenterprise, and a large number of executives have political background. So companies haveincentives to use its close ties with the government to protect from abusing. Governmentofficials have great control power and decision-making space in deciding on the benefit of taxincentives, so compared to the company whose executives have no government background,government-backed company executives are more likely to receive tax benefits. Although thisproblem has caused some scholars’ attention and they began studying in foreign countries, butin our country, rigorous academic researchers are not enough. Therefore, it is necessary tostudy the relationship between political connections and tax costs to provide references andsuggestions for the healthy development of enterprises, and establish effective corporategovernance mechanisms, also provide recommendations for governments to strengthen taxcollection and management, protect the interests of investors.This paper summarizes the theory of political relations, quality of information disclosureand income tax cost, based on China’s national conditions, examine China’s politicalconnections, quality of information disclosure which impact the cost of corporate income tax.First, introduce the background and significance of research, review literature from atheoretical point of view. Empirical part uses the sample data from2008-2010using theShenzhen Stock Exchange to study whether China’s listed companies’ political relations, thequality of information disclosure will impact income tax cost. Use of descriptive statistics,correlation analysis and regression analysis verify the following conclusions:(1) Politicalconnections increase the income tax cost;(2) The higher the quality of information disclosure,the lower the income tax cost. Furthermore, according to the corporate nature of the wholesample, we divided it into state-owned enterprises and private enterprises, the study foundthat compared with the state-owned enterprises, the results of private enterprises are moresignificant. Finally, elaborated according to the results of empirical research findings andthinking, and gives policy recommendations and limitations of the study.