Subsidiary governance and corporate tax planning: The effect of parent-subsidiary common directors and offficers

Author

Xin WANG
Yongxin XU
Liandong ZHANG, Singapore Management UniversityFollow
Gaoping ZHENG

Publication Type

Journal Article

Version

acceptedVersion

Publication Date

9-2022

Abstract

Top executives of the parent company often take positions as the directors and officers (D&Os) of subsidiaries. These parent-subsidiary common D&Os have better access to subsidiary information and can exert more influence over subsidiary operations. Therefore they can better identify tax-planning opportunities and coordinate tax arrangements. Using the mandatory disclosure of top executives' subsidiary positions for Chinese listed firms, we find that effective income tax rate is lower for firms with common D&Os. The tax-saving effect is stronger for firms with more intangible assets and with related-party transactions involving subsidiaries. The effect is also stronger when common D&Os have positions in economically significant subsidiaries and the subsidiaries entitled to preferential tax treatment and when common D&Os are involved in daily subsidiary operations. To our knowledge, this paper is the first to study the role of subsidiary governance in general and common D&Os in particular in corporate tax-planning.

Keywords

tax planning, subsidiary governance, common directors and officers (D&Os)

Discipline

Accounting | Business Law, Public Responsibility, and Ethics | Corporate Finance

Research Areas

Corporate Governance, Auditing and Risk Management

Publication

Journal of Management Accounting Research

Volume

34

Issue

3

First Page

179

Last Page

197

ISSN

1049-2127

Identifier

10.2308/JMAR-2019-510

Publisher

American Accounting Association

Citation

WANG, Xin; XU, Yongxin; ZHANG, Liandong; and ZHENG, Gaoping. Subsidiary governance and corporate tax planning: The effect of parent-subsidiary common directors and offficers. (2022). Journal of Management Accounting Research. 34, (3), 179-197.
Available at: https://ink.library.smu.edu.sg/soa_research/2073

Copyright Owner and License

Authors

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.

Additional URL

https://doi.org/10.2308/JMAR-2019-510