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The effect of institutional ownership on listed companies’ tax avoidance strategies

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  • Yunyun Jiang
  • Haitao Zheng
  • Ran Wang

Abstract

The percentage of institutional ownership in China has increased gradually. Does this characteristic of Chinese institutional investors affect their participation in corporate governance, which in turn, affects corporate tax avoidance activities? We take 1108 listed Chinese companies from 2009 to 2017 to study this issue. The paper uses average daily total market capitalization as an instrumental variable to test the endogeneity problems. We run a quantile regression (QR) at the median level as robustness testing to overcome the fat tail of financial data. Then, the shareholding ratio of majority shareholders is introduced to verify that ownership concentration is one of the mechanisms through which institutional shareholders influence corporate tax avoidance decisions. The findings are as follows: The proportion of institutional investors’ shareholdings is positively related to the degree of enterprise tax avoidance. The increase in institutional investors’ shareholdings is likely to promote corporate tax avoidance. When the level of ownership concentration is low, the increase in institutional ownership can play a greater role in promoting tax avoidance.

Suggested Citation

  • Yunyun Jiang & Haitao Zheng & Ran Wang, 2021. "The effect of institutional ownership on listed companies’ tax avoidance strategies," Applied Economics, Taylor & Francis Journals, vol. 53(8), pages 880-896, February.
    • Handle: RePEc:taf:applec:v:53:y:2021:i:8:p:880-896
    DOI: 10.1080/00036846.2020.1817308
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    Citations

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    Cited by:

    1. Patrick Velte, 2023. "Sustainable institutional investors, corporate sustainability performance, and corporate tax avoidance: Empirical evidence for the European capital market," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 30(5), pages 2406-2418, September.
    2. Mohammad I. Almaharmeh & Ali Shehadeh & Hani Alkayed & Mohammad Aladwan & Majd Iskandrani, 2024. "Family Ownership, Corporate Governance Quality and Tax Avoidance: Evidence from an Emerging Market—The Case of Jordan," JRFM, MDPI, vol. 17(2), pages 1-18, February.
    3. Ding Ning & Irfan-Ullah & Muhammad Ansar Majeed & Aurang Zeb, 2022. "Board diversity and financial statement comparability: evidence from China," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 12(4), pages 743-801, December.
    4. Eriana Kartadjumena & Nuryaman Nuryaman, 2024. "Ownership Structures, Executive Compensation and Tax Aggressiveness in Indonesia Mining and Plantation Companies: The Moderating Effect of Audit Quality," International Journal of Economics and Financial Issues, Econjournals, vol. 14(3), pages 23-32, May.
    5. Kadarisman Hidayat & Diana Zuhroh, 2023. "The Impact of Environmental, Social and Governance, Sustainable Financial Performance, Ownership Structure, and Composition of Company Directors on Tax Avoidance: Evidence from Indonesia," International Journal of Energy Economics and Policy, Econjournals, vol. 13(6), pages 311-320, November.
    6. Athira, A. & Lukose, P.J. Jijo, 2023. "Do common institutional owners' activisms deter tax avoidance? Evidence from an emerging economy," Pacific-Basin Finance Journal, Elsevier, vol. 80(C).

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