Semester
Spring
Date of Graduation
2022
Document Type
Dissertation
Degree Type
PhD
College
Chambers College of Business and Economics
Department
Finance
Committee Chair
Naomi Boyd
Committee Co-Chair
Ruiyuan Chen
Committee Member
Sadok El Ghoul
Committee Member
He Wang
Abstract
This dissertation includes three essays examining the interactions between tax avoidance, corporate governance, and corporate policies. The first essay exploits corporate governance shocks induced by cross-listing in the U.S., and find that firms tend to engage in less tax avoidance after cross-listing. This effect is more pronounced for firms that experience significant improvements in corporate governance, and for firms from countries with weaker shareholder protection and disclosure requirements. Taken together, the results indicate that cross-listing in the U.S. helps align the interests of managers and shareholders and reduces managerial diversion.
The second essay examines the importance of tax avoidance to equity pricing, and the role that institutional infrastructure plays in shaping this link. It shows that equity financing costs rise when firms take more aggressive tax positions. Additional analysis implies that stricter investor protection institutions and sound disclosure regulation alleviate investors’ concerns about insider diversion, moderating the positive impact of tax avoidance on equity pricing. Collectively, the results suggest that investors recognize the complementarity between insider diversion and tax avoidance in less protective environments.
The third essay investigates the effects of bank debt on corporate tax avoidance. It shows that bank debt is positively associated with corporate tax avoidance. This positive effect is more pronounced for firms with high level of bank debt, with high probability of default, with weak corporate governance, and for firms in countries with weak institutions. These empirical findings are consistent with the view that banks are opportunistic lenders. They perceive the benefits of increased expected cash flows from tax savings to outweigh the risks associated with tax avoidance activities.
Recommended Citation
Yang, Yang, "Tax Avoidance, Corporate Governance, and Corporate Policies" (2022). Graduate Theses, Dissertations, and Problem Reports. 11233.
https://researchrepository.wvu.edu/etd/11233