Titile: The Rich List and Tax Avoidance of Private Enterprises

Speaker: Yuangao Xiang, PhD student

Moderator: Professor Guoqing Zhang

Time: December 3, 2019 (Tuesday), 15:00-17:30

Location: Room 208, Jiageng II

Abstract

"Never show your wealth" is a long-standing business culture tradition in China. However, the announcement of various rich lists every year has exposed the wealth of Chinese entrepreneurs to the spotlight overnight, and has been widely discussed by the media and the public. The personal lives of entrepreneurs and their business activities have brought important influences that cannot be ignored. Based on this, this article takes the “Hurun 100 Rich List” for the first time on the list of the rich and their controlled companies from 2003 to 2018 as the research object, adopts the Difference-in-Differences Model （DID） research design based on the Propensity Score Matching Method（PSM）to empirically test the actual controller on board. The rich list has an empirical influence on corporate tax avoidance. The results show that, compared with before being listed, companies with actual controllers on the list have significantly lower tax avoidance levels than companies with no actual controllers on the list. This result is after a series of robustness tests, and is still significantly established. Furthermore, the cross-sectional difference test results of this article show that the negative influence relationship between actual controller listing and the level of corporate tax avoidance mainly exists in the rich list companies with high media attention, high degree of marketization in the region, and no political connection.

These results show that entrepreneurs' listing on the rich list has a depressing effect on corporate tax avoidance. The possible reason is that, on the one hand, the external supervision pressure caused by the rich list has caused the cost and risk of tax avoidance to rise, and the possibility of radical tax avoidance is reduced. On the other hand, in order to obtain government protection and increase the legitimacy of their own wealth, the listed entrepreneurs are more likely to to bear more taxes. The conclusions of this article have important implications for the microeconomic impact of the rich list on the capital market and the external factors affecting corporate tax avoidance.