Political corruption and corporate tax avoidance: A quasi-natural experiment

Abstract

Exploit a quasi-natural experiment created by China's anti-corruption campaigns, we investigate whether and how political corruption affects corporate tax strategies in this study. Taking advantage of a sample of Chinese listed companies, we find robust evidence that levels of local corruption are positively related to corporate tax avoidance. Moreover, we find that CEO traits, including gender, foreign experience, and tenure, perform a significant moderating role in the relationship we identified by influencing CEOs' perceptions of and propensity for bribery. Overall, our study sheds light on the implications of political corruption for corporate tax behavior, thus enriching the literature on corruption and corporate tax behavior.