Short Selling And Corporate Tax Avoidance

Margin trading system is an important way to promote the market more efficient operation.The short selling increases the direction of the transaction and the threat of short selling is constrained by the outside investors.In this article,we take China Stock Exchange announcing the list of financial margin as the natural experimental background to examine the impact of short selling on corporate tax avoidance,using a Difference-In-Difference study design,and using whether the company is listed in the list to divide the treat group and control group.The result turns out,compared to the list of margin bookings before the announcement,after the announcement of the list of short selling,the company which announced the list of short selling has a lower tax avoidance than the companies without announcing the list.This shows that the short selling system to enhance the transparency and effectiveness of corporate information,forming an external governance mechanism which have an impact on corporate behavior.Next,this paper starts from the four aspects of marginal cost price,cash flow uncertainty,company's business strategy and market competitiveness.The result turn out,the effect of margin trading on corporate tax evasion is mainly present in the companies who have higher marginal cost price,higher uncertainty cash flow,stronger market competitiveness,and the companies with a defensive policy.This result indicates that the company's internal governance formed by the company's characteristics will make a different response to the external governance mechanism.At last,this paper examines the impact of short selling on corporate value and the results show that short selling can enhance the company's market value.This article is of great significance to understand and evaluate the short selling system,to further understand the short selling mechanism of external governance,which has some reference significance to the follow-up study of short selling and tax avoidance and provides some theoretical support for the perfection of the margin trading system.