Separation Of Controlling Rights And Cash-flow Rights And Corporate Tax Avoidance Motive Earning Management

The worldwide studies on equity structure a lot, studies have shown that in addition to the UK and USA, most countries’ listed companies’ equity structure are centralized. Listed companies generally have the ultimate controller. In order to master greater control over the use of a smaller cash cost, the ultimate controlling owners commonly use the Cross Ownership or Pyramidal Structure to separate the ultimate controlling right and cash-flow right. The separation of the two rights would lead the ultimate controller to obtain personal benefits and encroach the interests of small controllers, because the cost of violations is very low. One of the main infringement way is to earning management. From the previous foreign research achievements, the companies’ earning management motivations include: the motivation of compensation contracts, the motivation of market system, the political cost drivers, the motivation of debt contract and tax motives and so on. Our country’s study confirmed that the motivation of compensation contracts, the motivation of market system, the political cost drivers, the motivation of debt contract. However, the study on tax avoidance motive earning management research was relatively few. The Tax Reform Act of 2008 reduced the corporate tax rate from 33 percent to 25 percent, provides an opportunity for the study on tax avoidance motive. Therefore this paper makes a positive analysis of the relation of the tax avoidance motive earning management and the separation of the ultimate controlling right and cash-flow right.First of all, in the second part we introduced the theory of the tax avoidance motive earning management and the separation of the ultimate controlling right and cash-flow right, and reviewed the classical studies on the relation of them both home and abroad. Subsequent tax in the third section is theoretically studies the means of earning management and control theory and the theory of the company, and analyzed under the condition of the tow rights separation tax earning management behavior of listed companies. The fourth part is the empirical analysis, the income tax rate in 2008 fell 115 listed companies as samples of the analysis of the above results empirically. Finally draw the conclusion: tax rates decline of listed companies, the ultimate control person control and the degree of separation of cash flow rights and corporate tax avoidance motive earning management has significantly negative correlation.