Abstract:
There are significant differences among the review of literature on the tax since the tax was taken into corporate governance framework. This paper tries to study the roles of tax from its impacts on corporate product market performance. Based on samples of Chinese A-share listed firms, we find increasing tax avoidance will improve corporate competitive power significantly, one standard deviation increase in corporate income tax avoidance in relation to rivals leads to a 1.9% gain in future market share. In addition, such an impact is concentrated in firms facing tighter financing constraints, while such an impact does not affected by information asymmetry, agency conflict and ownership structure. Finally, the impact of tax avoidance on product market performance can persist. Conclusions of this paper extend current literature and have policy implications.
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