Corporate Tax Avoidance,Auditor Industry Expertise And Cost Of Debt

Recently,with the improvement of China's tax collection and administration system the cost of tax evasion has increased dramatically,but the problem of tax loss still exists.Taxpaying companies have become more and more "smart",and the tax-avoiding activities are more complicated.It is undeniable that tax avoidance has always been an essential part of the particular corporate financial behavior.The original intention of tax avoidance is to reduce costs,increase cash flow and enhance company's value.However,under the modern company system,tax avoidance does not necessarily increase the value of cash holdings and the value of the company.What kind of information and risks are hidden behind the company tax avoidance? Does it have any impact on the cost of debt? As the provider of funds,creditors play an important role in the development of the company.And due to its risks,corporate tax avoidance will inevitably affect the debt costs.Theoretically,the impact of corporate tax-avoiding activities on the cost of debt depends on how the creditors trade-off between the benefits and the costs of tax avoidance.So how does the creditor respond to a series of tax-avoiding activities? In addition,as a third institution,whether auditors can play an important role in corporate external governance is a hot issue for scholars.Can the auditors with industry expertise build a bridge between the company and creditors,reduce information asymmetry between the two parties,and alleviate the company's agency problem? Will the impacts become different under different natures of property right? These problems deserve our discussion.Therefore,from the perspective of creditors,this paper will study the relation among corporate tax avoidance,auditor industry expertise and cost of debt.On the basis of relevant research,this paper analyzes the above problems by combining normative research methods and empirical research methods.First of all,this paper expounds the economic and social background of corporate tax avoidance and cost of debt.Then it combs the domestic and foreign literatures related to tax avoidance,auditor industry expertise and cost of debt,and seeks the research space of this paper.Secondly,under the framework of information asymmetry theory,principal-agent theory and signaling theory,this paper theoretical analyzed the relationship between corporate tax avoidance,auditor industry expertise and cost of debt,then put forward the hypothesis.Thirdly,this paper does the empirical test of among corporate tax avoidance,auditor industry expertise and cost of debt,it chooses the data of A-share listed companies from 2004 to 2016.Finally,based on the empirical results,the paper draws the conclusions and put forward policy recommendations.The research finds that there is a significant and positive correlation between tax aggressiveness and debt financing costs,and the relation is weakened with the increase of auditor industry expertise.It indicates that in China's credit market,as a fixed-income claimant,creditors will pay more attention to the risks brought by the company's tax avoidance behavior.Therefore,they tend to charge more rewards.The auditor industry expertise can effectively mitigate the negative impacts of tax avoidance on the cost of debt.Because for creditors,auditors with industry expertise have the motivation and ability to improve the company's information transparency and ease problem of information asymmetry,and then identify the self-interested behavior of managers.Further,we find that the regulatory role of auditor industry expertise is more significant in non-state-owned enterprises.It indicates that the auditor industry expertise can effectively alleviate the financing problems of private enterprises.Also,some policy recommendations are put forward in this paper.On the one hand,Taxpaying companies should establish a scientific concept of tax planning.They should correctly understand the costs and risks of tax avoidance,standardize the purpose and methods.And the most important thing is to control the behaviors within the legal range,so as not to let the tax-avoiding activities become a cover for manager's self-interest behaviors.On the other hand,the tax authority should strengthen the enforcement,continuously improve the level of law enforcement.Then the tax authority should formulate a more reasonable strategy according to the corporate's operation characteristics of the enterprise.In addition,the departments of government should improve the information disclosure system of listed companies,and provide a good institutional environment for the accounting firms to continuously improve their industry expertise.Also,accounting firms should continuously improve the auditor industry expertise according to their own scale,and strengthen their professional competence.Accounting firms should actively play the role in information intermediary and supervision,and better protect the interests of creditors.