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Title: Tax avoidance and tunneling: Empirical analysis from an agency perspective
Author(s): Chan, Koon Hung 
Author(s): Mo, P. L. L.
Tang, T.
Issue Date: 2016
Publisher: American Accounting Association
Journal: Journal of International Accounting Research 
Volume: 15
Issue: 3
Start page: 49
End page: 66
Taking advantage of the agency conflicts between controlling shareholders and minority shareholders and the weak corporate governance in a transition economy, we investigate the relationship between tax avoidance (proxied by effective tax rates) and tunneling (proxied by related-party lending) from a principal-principal agency perspective. We find that corporate tax avoidance is positively associated with tunneling after controlling for firm characteristics, corporate governance, and institutional factors that affect tunneling. This relationship is more pronounced for firms with cash shortages and in periods with relatively weak investor protection. In addition, the value-enhancing implications of tax avoidance are reduced for firms in which tax avoidance is highly correlated with tunneling. By demonstrating the existence of tunneling-related tax avoidance and its economic consequences, this study sheds light on the emerging agency perspective on tax avoidance.
DOI: 10.2308/jiar-51345
CIHE Affiliated Publication: No
Appears in Collections:BHM Publication

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