Research On Managerial Ability And Corporate Tax Avoidance

This paper examines the relation between managerial ability and corporate tax avoidance by using the data of the Chinese A-share stock market from 2000 to 2013. The result shows a negative and significant relation between managerial ability and tax avoidance. While more able manager are more likely to increase firm value,tax avoidance is not necessarily a value enhancing strategy. When the opportunity cost of the managers increases,the value added by tax avoidance reduces. Then more able managers have less propensity to engage in tax avoidance. Furthermore, the paper finds that the tax avoidance reacts less negatively to managerial ability for firms with higher corporate governance level. The results are robust to alternative measures of tax avoidance.