Tax Avoidance And Investment Efficiency

Chinese economic development is changing from a high-rapid-growth to a lowrapid growth.Under the pressure of the descending economic growth rate,economic reform requires change the economic develop model from quantity growth to quality growth.Investment is one of the three carriages of economic progress,so improving investment efficiency is the key to economic growth.Academics generally believe that agency problems and financing constraints are the main factors affecting investment efficiency.Recent studies have found that tax avoidance increases agency costs and information asymmetry.However,some scholars have found that tax avoidance can save money and ease financing constraints.So,is tax avoidance reducing investment efficiency by increasing agency costs? Or is tax avoidance improveing investment efficiency by easing financing constraints? Based on the perspective of agency effect and capital effect,this paper investigates the path of corporate tax avoidance affecting corporate investment efficiency,explores the mechanism of tax avoidance affecting investment efficiency.Firstly,this paper comb the literature which is about factors affecting investment efficiency,the economic consequences of tax avoidance,external financing dependence and institutional investors.From principal-agent theory,information asymmetry theory,MM theory,financing constraints theory and free cash flow hypothesis,this paper constructs a theoretical analysis framework of the relationship between tax avoidance and investment efficiency.Using external financing dependence to measure financing constraints,the paper examines the impact of tax avoidance on over-investment and under-investment in listed companies with different external financing dependence(low external financing dependence and high external financing dependence).Then,we introduce institutional investors' shareholding as an external governance variable to explore the impact of external governance mechanism on the relationship between tax avoidance and over-investment.The study found that the degree of tax avoidance is positively correlated with over-investment but has no significant relationship with under-investment;in grouping regression,it is found that tax avoidance can ease financing constraints and improve investment efficiency in listed companies with high dependence on external financing;however,tax avoidance increases agency costs and aggravates over-investment in listed companies with low dependence on external financing;institutional investors' shareholding can play a reasonable role in governance,alleviate over-investment and improve investment efficiency.The results of this study enrich the consequences research of tax avoidance,deepen the understanding of the impact mechanism of tax avoidance on investment efficiency and provide useful enlightenment for tax collection authorities,financial departments and enterprises.