CEO-CFO School Ties,Institutional Holdings And Corporate Tax Avoidance

China is a relationship-based country,since ancient times,guanxi occupys a very important position in our social organization.In current society,the process of learning should be regarded as the most critical period for people to establish social networks.With more and more schools setting up alumni associations,and calling on alumni back to school to hold special job fairs,school ties become important increasingly.Alumni companies are more willing to recruit or even reuse familiar alumni,the phenomenon of school ties between the upper and lower levels of the company is common,even CEO and CFO of the listed company graduated from the same university is not surprising.It is noteworthy that in the modern company,CEO and CFO are special and important management positions:CEO is a person in charge of company's policy development and implementation,and CFO is not just a person who is responsible for the daily income and expenditure activities,he is in an important position between manager and shareholder.He takes part in the company's strategic decision,especially in financial decision-making.On the other hand,he is also responsible for the supervision of the company's financial activities.If there are school ties between CEO and CFO,whether this relationship will affect the company's specific economic decisions?In China,tax expense is a high cost in the company's business process,so any company has a strong incentive to reduce corporate tax,and CFOs are often asked to set the concept of tax avoidance and use it in the company's various stages of operation and production processes.In the real economic environment,corporate tax avoidance behavior is widespread and has been deeply concerned by the academic community.The recent research is more concerned about the important role of company executives and their individual characteristics that play in tax avoidance,the most studied objects are CEO and CFO.It is obvious that CEO and CFO are two important forces influencing corporate tax avoidance,and the finalization of corporate tax avoidance decision need their cooperation and support,guanxi between them may play an important role.Will school ties between CEO and CFO affect corporate tax avoidance?In addition,in the corporate tax avoidance literature,the most discussed external governance mechanism is institutional investors that is called as“investment experts”in the capital market.Taking into account the supervision of institutional investors,whether school ties between CEO and CFO can help to implement tax avoidance policy.In the process of tax avoidance,school ties just simply helps to promote the CEO and CFO information communication and exchange,or act as a link for their interests?What is the economic consequences of tax avoidance on the firm value?What is the role of institutional holding in the above relationship?This paper chooses the data of China's A-share listed companies from 2007 to 2015 as the research sample,and uses literature review and commentary,theoretical analysis and hypothesis,and a series of empirical tests to explore the effect of CEO-CFO school ties on tax avoidance,and the role of institutional holding in the above relationship.Further,this paper examines the impact of corporate tax avoidance via school ties between CEO and CFO on firm value,then to explore the essence of school ties.The results show that the listed companies having school ties between CEO and CFO have higher level of tax avoidance,and institutional holding will weaken the relationship between CEO-CFO school ties and tax avoidance.Further analysis shows that for the companies having school ties between CEO and CFO,tax avoidance will reduce firm value,and when the proportion of institutional investors holding is higher,the damage to firm value stemming from tax avoidance in the company having school ties between CEO and CFO can also be suppressed.The above results show that school ties between CEO and CFO can significantly affect corporate tax avoidance.For the companies having school ties between CEO and CFO,tax avoidance does not bring about the improvement of firm value.They are more likely to encroach the interests of shareholders by constructing complex tax avoidance transactions,and then to maximize their own interests.It can be seen that in China,such a relational society,school ties are not only a kind of guanxi linked as personal emotion,but also a real economic interests.Fortunately,institutional investors as a external governance mechanism can effectively play their governance role,so that tax avoidance via school ties between CEO and CFO will be bound,then inhibit its damage to firm value,which also affirms the positive role of institutional investors in China's securities market.These results may remind stakeholders such as the listed companies,taxation authorities,and investors to pay attention to the social relationships between internal executives.Finally,from the three aspects of government regulatory,modern corporate internal governance and external environmental,this paper thinks deeply,in order to offer advice and suggestions to improve tax collection and management system,ensure the smooth operation of the company and protect the interests of investors.