Does Short Selling Mechanism Restrict Corporates' Tax Aggressiveness?

On March 31,2010,China formally launched margin trading scheme,which indicated the "unilateral long" trading structure in the capital market ended.With four large-scale expansions,nowadays there are nearly one-third A-share companies have the qualification to be traded with lending stocks.In academic research,some scholars are studying on margin trading's economic effectiveness,and many essays support that margin trading is not only a trading mechanism that affects price formation,but also a governance mechanism that directly affects corporate behavior.Specifically speaking,Short selling mechanism increases the sensitivity of stock prices to information,speeds the dissemination of private and public information,improves the corporate's information environment and decreases the information asymmetry between managers and investors,besides,it increases external supervision institution,which can effectively curb corporates' misconduct.In fact,the improvement of information transparency and the increase of external supervision may also affect corporates' tax aggressiveness.Therefore,this essay tries to study the impact of short selling mechanism on corporates' tax aggressiveness.Based on the sample of non-financial A-share listed companies during 2008-2014,this study finds that:(1)Compared with unqualified margin-lending stocks,after being a lending qualified stock,corporate's tax avoidance decreases significantly;(2))For companies locate in lower marketization area,the negative relationship between short selling mechanism and corporate's tax aggressiveness is stronger.(3)In regions with weak tax enforcement,the negative relationship between margin lending mechanism and corporate tax aggressiveness is more significant;(4)the short selling mechanism can reduce corporate tax avoidance that is motivated by personal interests,and then increase firm's value.These conclusions indicate that short selling mechanism can significantly constrain corporates' tax aggressiveness,and it can also make up for the external market environment and tax enforcement's absence and then increase firm value.This essay enriches the relevant literatures about tax aggressiveness factors and short selling mechanism's effect,and it can also provide some empirical evidence for deepening this financial reform and improving the margin trading system.