Corporate Risk-taking and Tax Avoidance:Based on the Perspective of Risk Sharing
Existing studies have shown that the level of tax burden reflects the proportion of government sharing in corporate benefits.However,few have delved into the aspect that tax burden also reflects the government's role in sharing corporate risk.Firms with varying levels of risk-taking exhibit differing degrees of demand for risk sharing through tax measures.In particu-lar,firms that engage in high levels of risk-taking are more likely to seek risk sharing behaviors from the government as a means to decrease their tax burden,mitigate their actual risk exposure,and alleviate their financial constraints.Taking Chinese A-share manufacturing listed companies from 2007 to 2019 as research sample,this study aims to empir-ically examine the impact of corporate risk-taking on tax avoidance through the utilization of the OLS regression method.In order to shed light on the underlying mechanisms,a combination of stepwise regression and bootstrap methods is employed.Additionally,an interaction item is constructed to test the moderating effect of information environment and regional financial development level.Furthermore,a grouped regression analysis is employed to explore the cross-sectional differences of the re-lationship between corporate risk-taking and tax avoidance at the firm level.To enhance the validity and reliability of the find-ings,this study also uses a series of robustness tests,such as altering variable measurements,quantile regression,implement-ing instrumental variable and propensity score matching method.Empirical findings reveal that the higher level of risk-taking,greater the degree of tax avoidance.This relationship is primarily driven by two underlying factors:financial constraints and accounting information comparability.When firms en-gage in high-risk activities,they often face severe financing distress.Consequently,they are inclined to reduce their tax burden through tax avoidance,thereby transferring a portion of the risk to the government.Furthermore,an increase in the level of risk-taking tends to reduce accounting information comparability,thereby augmenting the opportunities for tax avoidance.Addi-tionally,our study emphasizes that improvements in the information environment and financial development can mitigate the degree of tax avoidance among highly risk-taking firms.Notably,the positive association between risk-taking and tax avoid-ance is particularly pronounced in small firms,non-state-owned firms,and high-tech innovation firms.This study explicitly integrates risk factor into tax avoidance research,which offers a fresh explanation for tax avoidance.It also enriches the existing literature on the economic consequences of corporate risk-taking from the perspective of tax avoid-ance.The findings of this study have important policy implications for optimizing tax reduction and fee reduction policies from a structural standpoint.Manufacturing companies that engage in high levels of risk-taking often require the government's sup-port in sharing their risks.These firms are more inclined to reduce their tax burden through tax avoidance in order to alleviate financial pressures.As a result,it is crucial for the government to consider implementing effective structural tax reduction measures while also strengthening inclusive tax reduction policies.Providing preferential tax treatment to these manufacturing companies can better stimulate their development vitality and momentum.
corporate risk-takingtax avoidancefinancial constraintsaccounting information comparabilityinformation en-vironmentregional financial development level
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