The Degree Of Tax Avoidance And The Future Profitability Changes Of The Company Data Analysis Based On Chinese Listed Companies

Do firm managers invest the savings from tax aggressive in positive net present value projects that enhance future profitability or divert them towards perquisite consumption,rent extraction,and value destroying projects?We indirectly investigate this question by testing whether tax avoidance moderates the association between current and future profitability.Consistent with the negative implications of tax avoidance(e.g.rent extraction)we document that,on average,the main components of current profitability:margins,utilization of assets and operating liability leverage,result in lower future profitability for tax aggressive firms as compared to firms that are not tax aggressive.Further,the negative effect of lower margins is more robust and persistent than the impact of ineffeicient asset utilization and operating liability leverage.These results persist in various contexts that mitigate or exacerbate rent extraction,such as the existence of foreign operations,better governance structure,industry leadership position.In this dissertation,based on the data of six years from 2011 to 2016,we study the relationship between the current and future profitability of listed companies and their components and the degree of tax radicalization of listed companies.We also examine the relationship between current and future profitability of tax radicalization.We use the DuPont framework to determine the drivers of future profitability,i.e.whether tax avoidance can have a beneficial effect on the relationship between current and future profitability and ultimately validate the assumptions.We find that there is a low correlation between current and future earnings between tax and non-tax firms.By analyzing the effect of tax radicalization on future profitability,we give another perspective on the basic mechanism of tax avoidance affecting company value.