Media Coverage And Tax Avoidance:Theoretical Model And Empirical Evidence

Taxation is an important financial expenditure for enterprises.Driven by the goal of maximizing profit,enterprises' tax avoidance activities are becoming increasingly common.In the meanwhile,as a major source of fiscal revenue,taxation is an important tool for state governance.In order to preserve tax source,government supervisors' anti-avoidance actions are also proceeding.The tax avoidance and anti-avoidance game between enterprises and government supervisors has been widely concerned,and in recent years,the warming anti-avoidance actions in worldwide further bring it into focus.The perspective of study on the influence factors of tax avoidance has shifted from operating characteristics of enterprises to internal and external governance factors.As one of the emerging external governance factors,media,especially the mechanism and effect of media has become a hot topic.With the rapid development of information technology,the media has taken advantage of its information superiority to play an increasingly crucial role in the field of market pricing,corporate governance and so on,forming a beneficial complement to formal system.This paper attempts to investigate whether and how media coverage,which is an informal system,can affect enterprises' tax avoidance decisions.Based on the traditional theory and agent theory of tax avoidance,this paper constructs the utility function model of the manager in the tax avoidance activity for theoretical analysis,and conducts empirical test using the sample of A-share listed company from 2007 to 2014,which shows that:(1)the higher the media coverage,the lower the degree of enterprises' tax avoidance;(2)in the area of lower tax enforcement,the media coverage has the stronger effect on the degree of tax avoidance;(3)for the enterprise of lower information opacity,the media coverage has the stronger effect on the degree of tax avoidance.These results indicate that media coverage restrains tax avoidance activities through the way of remedying the deficiencies of tax enforcement system and improving the information transparency of enterprises.Furthermore,this paper also finds that the effect of media coverage on tax avoidance is more evident on the radical side,and the tax avoidance on the radical side also impairs firm value.The result shows that the governance outcome of media on radical tax avoidance is a win-win,whether from the standpoint of government supervisors or enterprise.This paper not only enriches the existing literatures on media coverage and tax avoidance,but also has material implications for government's tax regulation and firms' tax planning practice.