Paul L. Caron

Saturday, November 13, 2021

Abortion And Corporate Tax Avoidance

Kam C. Chan (Western Kentucky; Google Scholar), Jiaxin Wang (Zhongnan), Zhi Wang (Southwestern; Google Scholar) & Chao Yan (Zhongnan; Google Scholar), Is Reverence for Life Reverence for Rule? Abortion Rate and Corporate Tax Avoidance in China:

Despite the momentum of research on the impact of informal institutions on corporate behavior in recent years, few studies probe the effect of an “awe culture” on corporate behavior. Thus, this study explores the economic consequences of the awe culture. It proxies awe culture with regionally induced abortion rates and examines its influence on corporate tax avoidance in China. We document that higher induced abortion rates associate with a higher degree of corporate tax avoidance, confirming that “reverence for life is reverence for rules.”

Further, awe culture influences corporate tax avoidance via management opportunism and risk-appetite channels. The conclusions remained intact after an array of robustness tests. Further analysis suggests that the awe culture effect on corporate tax avoidance is insignificant when senior executives or directors have overseas backgrounds or the proportion of female board members is high. However, the effect is more pronounced when firms have high financial constraints, poor internal governance, or weak taxation enforcement. Notably, given that awe culture shapes corporate behavior, listed firms should fully consider and use awe culture in their economic practices.

Scholarship, Tax, Tax Scholarship | Permalink