Please use this identifier to cite or link to this item: http://hdl.handle.net/10125/51925

The Effect of Foreign Institutional Ownership on Corporate Tax Avoidance: International Evidence

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Title:The Effect of Foreign Institutional Ownership on Corporate Tax Avoidance: International Evidence
Authors:Hasan, Iftekhar
Kim, Incheol
Teng, Haimeng
Wu, Qiang
Keywords:Tax Avoidance
Foreign Institutional Ownership
Tax Morale
Shareholder Protection
Date Issued:23 Aug 2017
Abstract:We find robust evidence that foreign institutional investors are negatively associated with their investee firms’ tax avoidance. To mitigate endogeneity concerns, we apply three identification strategies. First, we implement a two-stage least squares model. Second, we perform a difference-in-differences analysis by exploiting China’s legal reform, Qualified Foreign Institutional Investors program, as a quasi-natural experiment. Third, we compare changes in corporate tax avoidance in response to a significant increase in FIIs. We further find that the negative association is dominated by FIIs from countries with high tax morale and FIIs from countries with strong shareholder protection. Finally, we find that the extent of tax morale and shareholder protection in the country where an investee firm is located also matters. We conclude that FIIs play an active role in shaping investee firms’ corporate tax avoidance policy.
URI/DOI:http://hdl.handle.net/10125/51925
Appears in Collections: 06 International Taxation (IntTax)


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