The Impact of Institutional Cross‐ownership on Corporate Tax Avoidance: Evidence from Chinese Listed Firms

Abstract

This study investigates the relationship between institutional cross‐ownership and corporate tax avoidance in Chinese listed firms. Our findings indicate that the tax avoidance aggressiveness of Chinese listed firms could be significantly motivated by institutional cross‐ownership. This finding is robust to endogeneity tests, namely, propensity score matching estimation, two‐stage least squares regression, generalised method of moments test, and a falsification concern. Further, this positive relationship between institutional cross‐ownership and tax avoidance is more pronounced for listed firms with greater managerial ability and those with higher auditor industry expertise. Finally, such a relationship is more obvious for cross‐owners within the same industry, but only significant for independent cross‐owners, non‐state‐owned enterprises and firms within a less competitive industry. All main findings are robust to various robustness tests.

Common institutional ownership and green innovation in family businesses: Evidence from China

“…The independent variable in this paper is common institutional ownership (Coz). Referring to the existing literature (Cheng, Wang, et al, 2022; Liu & Hou, 2023; Xiao & Xi, 2022), this paper constructs indicators from three dimensions:A common institutional ownership dummy variable (Coz1). Under China's regulations on the administration of shareholdings in securities companies, shareholders holding more than 5 per cent of a company's equity are defined as major shareholders.…”

“…The independent variable in this paper is common institutional ownership (Coz). Referring to the existing literature (Cheng, Wang, et al, 2022;Xiao & Xi, 2022), this paper constructs indicators from three dimensions:…”

“…At the same time, there are two distinct perspectives on the economic consequences of common institutional ownership. Some studies have argued that common institutional ownership can create synergistic effects in the innovative development (Gao et al, 2019), external cooperation (Wu et al, 2022), access to financing (Chen et al, 2021), and corporate governance of enterprises by virtue of the advantages of information and resources (Liu & Hou, 2022; Xiao & Xi, 2022). However, some studies have also pointed out that common institutional ownership increases the tendency of collusion among affiliates in the same industry, reducing the degree of competition in the market and distorting the market's price mechanism (Azar et al, 2018).…”

Editorial

“…(2023) present a framework for understanding the motivations, limitations and objectives that guide managers’ decision making. Han et al. (2023) model and estimate how new information is incorporated into prices in an uncertain environment. Xiao and Xi (2023) find an association between the tax avoidance aggressiveness of Chinese listed firms and their institutional cross‐ownership, suggesting that ownership may be a motivating factor.…”

“…Xiao and Xi (2023) find an association between the tax avoidance aggressiveness of Chinese listed firms and their institutional cross‐ownership, suggesting that ownership may be a motivating factor.…”