Equity Risk Incentives And Corporate Tax Aggressiveness

This paper discuss the tax avoidance is a conclusive fact of equity risk incentive. Atprevious study, most of the scholars found that the equity risk incentive can promotemanagers to choose and implement risk financing and investment decisions, because theserisk behavior can increase the rate of return on stock and increase the value of stock options.Tax avoidance behavior is uncertain behavior, in a period of time, which can increase theprofit and bring cost to the company and managers at the same time.Therefore,managers musthave the incentive to choose and implement tax avoidance activities which is risk activity andcan increase shareholders’ wealth.This paper assume that equity risk incentive can promotemanagers to choose tax avoidance activities,through the empirical research method, we testthe equity incentive and risk managers are positively related tax avoidance, and this paper goa step further that corporate governance level influence on the relationship of equity riskincentive between tax avoidance.In incent years, the problem of tax avoidance is outstanding all over the world. Beasusetax avoidance will directly reduce income of national finance. so tax avoidance problem hasbecome the focus of concern from the all over the world.Managers equity incentive isregarded as an important factor of the tax avoidance by a few scholars.The stock risk incentive is to solve the principal-agent relation between the managementand shareholder in the modern joint-stock company system and it produce modern long-termincentive system. Executive stock options granted shareholders layer, in order to achieve theinterests of shareholders and unite the senior executives and the wealth of enterprises, tostimulate executives according to the profit of shareholders act, chasing the economic benefitsof tax avoidance.The significance of this paper lies in:First, this paper construct some of the more in-depth and detailed empirical evidence andoffer a policy recommendations for the Chinese enterprise equity incentive system and give acertain contribution for stock ownership incentive research, through the research on equityrisk incentive influence on the tax avoidance behavior.Second, this paper further investigate corporate govermance inflence on relationship ofequity risk incentive and degree of tax avoidance, this imply the guarantee of incentivemechanism is perfect corporate govermance, this conclusion is important for theory circle and the practice circle.