CEO Power, Environmental Uncertainty And Corporate Tax Avoidance

Tax avoidance behavior is a business strategy.Companies are likely to harm state’s tax revenue through aggressive tax avoidance behavior and retain more resources for their own retirements,then improve the revenue of managers.In the principal- agent theory,corporate tax avoidance is an agency problem.Any executives who have "selfish motives" are likely to use a proxy mechanism for personal gain,company managers are entirely possible to retain more economic benefits from company by the way of expanding tax avoidance,and then seek more potential benefits for their own.In various companies of all countries,the behavior that companies’ managers reduce corporate tax through the development of tax avoidance policy is becoming worse and worse.On the other hand,the environmental factors strategic management theory has obtained a lot of concern since the birth of it.In the country, environmental uncertainty already develop into the practical application stage from the cognitive stage in the country,the research of how the environmental uncertainty affects firm business strategies attracts much attention.Based on the characteristics that China is currently in transition and emerging economic times, economic and political factors change frequently,companies generally face more turbulent environment.The degree of corporate tax avoidance as the reflection of companies’ aggressive tax planning is closely associated with the political and legal environment factors, which has inseparable relation to the awareness to the environmental comprehensive factors of company managers.Thus,the relation between environmental uncertainty and corporate tax avoidance is also worth exploring.Domestic and international scholars have done numerous researches about factors affecting the company tax evasion.Early researches focused on the relationship between corporate level features and tax avoidance,such as company size,debt ratio and corporate profits. Researches under principal-agent framework focused on how executives’ remuneration after-tax earnings influences the corporate tax avoidance.As for as external factors,the present literature only concerned with the effect of changes in accounting standards and external regulatory factors on corporate tax avoidance,and what is the role of CEO power as the one of factor that affects CEO incentive and comprehensive response of CEO characteristics to corporate tax avoidance?On the other hand,the company is in changing environment, external environment changes all the time,how does the environmental uncertainty affect corporate tax avoidance? Further,when CEO power and environmental uncertainty simultaneously influence corporate tax avoidance,what kind of the mutual impact of above on corporate tax avoidance will produce?Does it mutually contain "competitive relationship" or a mutual cooperation "collaborative relationship" ?which is the dominant factor in these? Whether the economic consequences of CEO power and environmental uncertainty to corporate tax avoidance will be different under different environmental conditions of uncertainty?This paper focues on these issues,strives to explore the truth of the above problems,and ultimately works out effective and practical guiding proposals.This paper applicates the method of literature analysis and review, logical assumptions and empirical test.It chooses the data of China’s A-share listed companies from 2007 to 2012 as the research sample.It chooses CEO power and environmental uncertainty as a starting point to explore the impact of these on corporate tax avoidance,tests the interaction of CEO power and environmental uncertainty further when they affect corporate tax avoidance,analyzes which is the principal factor in the process of CEO power and environment uncertainty influencing corporate tax avoidance, and explores whether the role of CEO power and environmental uncertainty to corporate tax avoidance will be different based on the different environmental uncertainty conditions.The results show that CEO makes decision of tax avoidance based on self-interest motivation,CEO power has a significant positive correlation with corporate tax avoidance.In our current period of economic transition,environmental uncertainty has a significant positive correlation with corporate tax avoidance,the higher the environmental uncertainty,the greater the degree of corporate tax avoidance.When CEO power and environmental uncertainty affect corporate tax avoidance at the same time,environmental uncertainty restricts the correlation of CEO power with corporate tax avoidance,then CEO power resists the restriction,so CEO power has a "competitive relationship" with environmental uncertainty,which inhibits corporate tax avoidance to some extent.In terms of the impact on corporate tax avoidance,environmental uncertainty plays a leading role compared with CEO power.Conclusions of this paper show that in the period of China’s emerging and transition economy,under the condition that there still are significant improvements to be made in market economy system,environmental uncertainty inhibits agency costs about company managers to some extent.Meanwhile,outside investors interests are also protected.Conclusions of this paper can provide a useful reference and support evidence for tax policy formulation and monitoring mechanisms improvement.To the tax policy formulation department,the conclusion that CEO power and environmental uncertainty have effect on corporate tax avoidance provides a new perspective that how to suppress the tax avoidance behavior and improve tax collection situation.In addition, the interaction between CEO power and environmental uncertainty provides relevant evidence for tax collection policy.To tax regulatory department,the finding of this paper provides some reference and proof for supervising corporate tax payment.To external investors,the conclusion of this paper about the impact of environmental uncertainty on corporate tax avoidance and its interaction with the CEO power provides a basis for investment decision-making.In order to improve our tax collection and management system,we analysis the problem and put forward suggestions from modern corporate governance and external environment factors to improve our tax collection management system and corporate governance mechanism further.