Wang, Liting and You, Kefei ORCID: 0000-0001-7253-5838 (2022) The impact of political connections on corporate tax burden: evidence from the Chinese market. Finance Research Letters, 47 (B):102944. ISSN 1544-6123 (doi:https://doi.org/10.1016/j.frl.2022.102944)

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Abstract

This paper investigates how political connections affect corporate tax burden. We construct two multi-tiered political connections series and employ the Propensity Score Matching approach. We find that stronger political connections lead to a lower corporate tax burden in Chinese listed firms. Specifically, the nominal (effective) tax rate decreases by an average of 1.03% (0.33%) as the hierarchical position of Chairman or CEO in the government rises by one rank (e.g., from a sub-provincial to provincial minister), and by an average of 0.99% (0.98%) as the administrative level of the government where the Chairman or CEO holds the position rises by one level (e.g., from a provincial to a central government). Our further analysis shows that political connections reduce the tax burden for both SOEs and non-SOEs, especially for the latter.

Item Type:	Article
Uncontrolled Keywords:	political connections; corporate tax burden; propensity score matching; China
Subjects:	H Social Sciences > HB Economic Theory H Social Sciences > HC Economic History and Conditions J Political Science > JQ Political institutions Asia
Faculty / School / Research Centre / Research Group:	Faculty of Business Faculty of Business > Department of Accounting & Finance Faculty of Business > Institute of Political Economy, Governance, Finance and Accountability (IPEGFA) Faculty of Business > Institute of Political Economy, Governance, Finance and Accountability (IPEGFA) > Centre for Governance, Risk & Accountability (CGRA)
Last Modified:	05 May 2024 01:38
URI:	http://gala.gre.ac.uk/id/eprint/36339

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