Does Monetary Policy Affect Company’s Tax Planning?——Empirical Evidence from Chinese Listed Companies
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| Title | Does Monetary Policy Affect Company’s Tax Planning?——Empirical Evidence from Chinese Listed Companies
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| Author | Chen Dong,Fan Rui and Tang Jianxin |
| Organization | Economics and Management School of Wuhan University |
| Email | chendongwinter@126.com |
| Key Words | Monetary Policy; Tax Planning; Financing Constraints; Under-investment; Operating Uncertainty |
| Abstract | Tax is a strong power influencing corporate behavior. Monetary policy affects the accounting and financial behavior of enterprise. This paper study the impact of monetary policy on Chinese listed tax planning and its economic consequences, to reveal how the listed companies deal with the adjustment of monetary policy. Based on 2003-2012 A-share listed companies, we found: under tightening monetary policy, enterprises use more aggressive tax planning level. In private companies, non-preferential tax companies and the companies with high operating uncertainties, the degree of tax planning is influenced by tightening monetary policy more obviously. Aggressive tax planning saves cash flows and help to ease the financing constraints for private companies and non-preferential tax companies. Aggressive tax planning also help to ease under-investment for private companies with good investment opportunities under tight monetary policy. Aggressive tax planning helps to reduce financial distress risk for companies with high operating uncertainty. These findings not only expand research on cash supply mechanism under tight monetary policy, promote our understanding on enterprises’ coping strategy, but also enrich research on effect of informal financing mechanism on enterprise development and economic growth. |
| Serial Number | WP668 |
| Time | 2014-08-26 |
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