Does Tax Aggressiveness Generate Debt Substitution Effect?

The investment and financing decision have been hot issues in research.The financing decision affects the capital structure of an enterprise.MM theory suggests that there is no difference between the debt financing and equity financing under perfect capital market condition.However,considering the actual tax burden,the value of the company has a correlation with the proportion of debt financing.At the same time,tax aggressive behavior of enterprises draws more and more attention of scholars.Although corporate tax rate is fixed,but enterprises can implement tax avoidance measures,thereby reducing the effective tax rate.Based on the analysis of the transmission mechanism,the aggressive behavior of corporate tax may affect their financing demand.However,there is little research on the impact of corporate tax aggressive behavior on corporate investment and financing decisions.Because China listed companies can choose debt financing and equity financing more conveniently,the choice of capital structure has more space for the purpose.In addition,due to the special background of China,the listed company has obvious "protectionism",as part of the government’s tax authority has strong elasticity of tax collection on listed companies.Therefore,the listed companies in China are ideal samples to study the impact of tax aggressiveness on the capital structure decision-making.Based on the perspective of capital structure of listed companies,this paper analyzes whether there is a substitution effect of debt in tax aggressive behavior of enterprises.This paper selects 2010-2015 Chinese A-share listed companies as the sample to test the impact of decision of enterprises tax aggressiveness degree on corporate debt,and finds that corporate tax aggressiveness has debt substitution effect.Further study also finds that the effect of the performance of different companies in the earnings shows different characteristics.