TY - JOUR
T1 - The effect of foreign institutional ownership on corporate tax avoidance
T2 - International evidence
AU - Hasan, Iftekhar
AU - Kim, Incheol
AU - Teng, Haimeng
AU - Wu, Qiang
N1 - Funding Information:
We thank Robert Larson (Editor-in-Chief), two anonymous reviewers, Russ Hamilton (Discussant), Ani Mathers (Discussant), T.J. Atwood, Paul Demere, Katharine Drake, Bill Francis, Yijiang Zhao, Asokan Anandarajan, Xing Jing, Hua Zhang, and Kaishu Wu for their valuable suggestions and comments. We thank seminar participants at University of Sydney, University at Albany, University of Missouri, Kelley School of Business Indianapolis, Chinese University of Hong Kong, Fordham University, New Jersey Institute of Technology, JiaoTong University, University of Science and Technology of China, the 2016 American Accounting Association Annual Conference, the 6th International Conference of Financial Engineering and Banking Society, the 2018 Hawaii Accounting Research Conference, and the 2019 Rensselaer Polytechnic Institute Lally Research Symposium for their valuable comments.
Publisher Copyright:
© 2021 Elsevier Inc.
PY - 2022/3
Y1 - 2022/3
N2 - We find that foreign institutional investors (FIIs) reduce their investee firms’ tax avoidance. We provide evidence that the effect is driven by the institutional distance between FIIs’ home countries/regions and host countries/regions. Specifically, we find that the effect is driven by the influence of FIIs from countries/regions with high-quality institutions (i.e., common law, high government effectiveness, and high regulatory quality) on investee firms located in countries/regions with low-quality institutions. Furthermore, we show that the effect is concentrated on FIIs with little experience in the investee countries/regions or FIIs with stronger monitoring incentives. Finally, we find that FIIs are more likely to vote against management if the firm has a higher level of tax avoidance.
AB - We find that foreign institutional investors (FIIs) reduce their investee firms’ tax avoidance. We provide evidence that the effect is driven by the institutional distance between FIIs’ home countries/regions and host countries/regions. Specifically, we find that the effect is driven by the influence of FIIs from countries/regions with high-quality institutions (i.e., common law, high government effectiveness, and high regulatory quality) on investee firms located in countries/regions with low-quality institutions. Furthermore, we show that the effect is concentrated on FIIs with little experience in the investee countries/regions or FIIs with stronger monitoring incentives. Finally, we find that FIIs are more likely to vote against management if the firm has a higher level of tax avoidance.
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U2 - 10.1016/j.intaccaudtax.2021.100440
DO - 10.1016/j.intaccaudtax.2021.100440
M3 - Article
AN - SCOPUS:85121317441
SN - 1061-9518
VL - 46
JO - Journal of International Accounting, Auditing and Taxation
JF - Journal of International Accounting, Auditing and Taxation
M1 - 100440
ER -