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The Impact Of Stakeholder Orientation On Tax Avoidance: Evidence From A Natural Experiment, Gary Chen, Ani Manakyan Mathers, Bin Wang, Xiaohong Wang
The Impact Of Stakeholder Orientation On Tax Avoidance: Evidence From A Natural Experiment, Gary Chen, Ani Manakyan Mathers, Bin Wang, Xiaohong Wang
Finance Faculty Research and Publications
We study the effect of stakeholder orientation on corporate tax avoidance. Using the staggered passage of constituency statutes across U.S. states between 1983 and 2006, we show that greater stakeholder orientation results in increased tax avoidance. We further find greater tax avoidance among firms with limited financial resources and that employees benefit from the change. Our results are consistent with stakeholder salience theory that resource-constrained managers prioritize the claims of salient stakeholders, such as employees, at the expense of secondary stakeholders, such as the government.
Securities Litigation And Corporate Tax Avoidance, Matteo Arena, Bin Wang, Rong Yang
Securities Litigation And Corporate Tax Avoidance, Matteo Arena, Bin Wang, Rong Yang
Finance Faculty Research and Publications
We examine whether litigation risk is systematically related to corporate tax avoidance. We find that the exogeneous reduction in the threat of securities class action litigation due to the 1999 ruling of the Ninth Circuit Court of Appeals effectively increases corporate tax avoidance, which is consistent with the notion that the threat of shareholder litigation plays a disciplinary role in curbing managerial rent extraction from tax avoidance activities. This finding is robust to alternative model specifications including two placebo tests and propensity score matching. We further find that labor union and alternative external governance mechanisms such as analyst coverage and …