Corporate Governance,Tax Evasion,and Corporate Investment Efficiency

The phenomenon of tax avoidance by enterprises is relatively common and tax avoidance has been concerned by the theoretical community.However,the study on the economic consequences of tax avoidance has not been unanimously concluded.At present,there are few domestic studies on tax evasion to corporate investment efficiency.Investment is of great significance to the long-term development of the company,and is an important way to increase corporate value.Study the impact of tax avoidance behavior on corporate investment efficiency and the economic consequences of tax evasion has important practical and theoretical significance.Based on principal-agent theory,information asymmetry theory,and investment theory,this paper builds a multiple regression model and based on the data of the Shenzhen Stock Exchange non-financial listed companies from 2008 to 2016 to study the relationship between tax avoidance and corporate investment efficiency,and corporate governance.The mechanism explores the impact of tax avoidance and the relationship between investment efficiency.First,this paper estimates the expected amount of capital investment based on Richardson model,and measures the investment efficiency by the absolute value of the difference between it and the actual capital investment.The difference between taxation and taxation after deducting accruals is used as the main measure of tax avoidance.Set seven control variables,such as free cash flow,profitability,and asset-liability ratio,to study the effect of tax avoidance on corporate investment efficiency.The results show that there is a significant negative correlation between tax avoidance and corporate investment efficiency.Further,after distinguishing the over-investment and under-investment by the residual error estimated by the above model,it was found that tax avoidance mainly led to excessive investment rather than insufficient investment.About this result,the main reason is that tax avoidance saves cash outflows and increases the disposable cash of the company.At the same time,tax avoidance behavior distorts accounting information.In the case of asymmetric information,it provides an opportunity for management to take part in over-investment.Second,seven dimensions including nine indicators are selected to measure corporate governance.Principal component analysis is used to extract comprehensive corporate governance indicators and the role of corporate governance in regulating the relationship between tax avoidance and investment efficiency is studied.The empirical results show that a good corporate governance mechanism helps to suppress the negative relationship between tax avoidance and corporate investment efficiency.This is mainly due to the fact that a good internal corporate governance mechanism will reduce the possibility of managers reducing personal costs by expanding personal consumption to meet individual utility.Good information disclosure quality and product market competition will help alleviate information asymmetry and improve investment efficiency.Thirdly,we study the corporate governance indicators one by one further.Before grouping investment efficiency,the three corporate governance mechanisms of management incentives,information disclosure quality,and product market competition have played a role in the process of tax avoidance affecting corporate investment efficiency.Board governance,independent director governance,legal supervision and equity governance are not significant.After grouping,further study results show that,except for high-level management incentives and legal supervision,the rest of the governance mechanisms are significantly effective.The main reason for this discrepancy is that tax avoidance causes more investment rather than underinvestment.In summary,the results of this paper show that tax avoidance will increase the amount of corporate cash holdings,exacerbate information asymmetry and principal-agent conflicts leading to inefficient investment,and good corporate governance mechanisms will help improve tax avoidance and inefficient investment and the negative relationship between them.At the same time,not all corporate governance mechanisms have a positive effect.The concrete manifestations are: governance of the board of directors,governance of independent director,governance of equity structures,quality of information disclosure,and governance of products and factors in the market competition.The role of legal supervision and management incentives are not significant.This article proposes relevant policy recommendations from the three perspectives of regulating tax avoidance behavior,improving the management incentive system,and strengthening the control of cash flow.This study shows that tax avoidance can lead to non-efficiency investment,and corporate governance has a positive effect on the negative correlation between tax avoidance and corporate investment efficiency.Therefore,this paper believes that in order to improve the efficiency of corporate investment,it is necessary to standardize tax avoidance behavior,improve the quality of information disclosure,strengthen cash flow management and control,and improve corporate governance mechanisms,especially the governance of the board of directors and the governance of the board of supervisors.