DOI: 10.5176/2251-1997_AF18.105
Authors: Yao Lu, Zhang Peng
Abstract:
This paper investigates short selling pressures’ impact on tax avoidance. Taking advantage of the pilot program of security companies’ margin trading and security lending launched in Chinese A-share market, we conduct Difference-in-Differences and fuzzy RD estimation. We find that firms reduce tax avoidance behaviors after their stocks becoming pilot stocks. Further analyses show that this effect can be explained by corporate governance improvement due to stronger external monitoring stem from short selling pressures. Besides, this effect is more pronounced in more equity financing dependent firms and state-owned enterprises. These findings suggest short selling pressures can make firms “steal” less from the government.
Keywords: tax avoidance; short selling; corporate governance
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