Research On The Effect Of Tax Avoidance On Corporate Cash Holdings In Chinese Listed Companies

Tax avoidance is traditionally treated as a way to reduce corporate expenditure in tax,which will ultimately bring down cash outflow.It is also viewed as a kind of value-added activity of governments transferring finance to firms.As a research into the Principal-Agent Theory argues,nonetheless,one of the crucial elements in affecting cash holdings is with the agency problem.The information asymmetry and other negative effects brought by tax avoidance will intensify the agency conflict,making the management or controlling shareholders realize their purpose of rent seeking through the consumption or transfer of cash.And it will reduce the cash holding level and the efficiency of cash use.Based on this,whether the tax avoidance behavior with dual nature can improve the company's cash holding level and increase the cash holding value is the main issue to be discussed in this paperThis article discusses the influence of tax avoidance on the corporate cash holdings and the value of cash holdings using empirical research method through the sample of listed companies in the Shanghai and Shenzhen Stock Exchange(2008-2016).It is found that those companies with higher scores in tax avoidance have relatively lower cash holdings and excess cash holdings.There are huge differences between companies having redundant cash and those with insufficient cash,and tax avoidance can decrease the level of redundant cash.Due to the existing agent problems and China's special taxation system,tax avoidance cannot increase the value of cash holdings,and at the same time,the ownership structure can impose some impacts in this process.This paper provides more evidence about the relationship between tax avoidance and cash holdings,proves the importance of corporate governance mechanism,and offers suggestions on corporate tax planning,government regulation,and investments.