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Why do Banks Assist Corporate Tax Avoidance? Evidence from Debt-Equity Dual Holding

Office of Alumni and External Relations    2021-10-12

Subject: Why do Banks Assist Corporate Tax Avoidance? Evidence from Debt-Equity Dual Holding

Guest: Yahuan Qi, Associate Professor, City University of HongKong

Host: Jing Xing, Associate Professor, Antai

Time: Monday, Oct 18, 2021,  10:00-11:30

Venue: Tecent Meeting (Please send email to finance@acem.sjtu.edu.cn for meeting number and password)


Abstract:

This study finds that banks are more likely to assist their corporate clients' tax avoidance activities when they are dual-holders (i.e., hold both debt and equity) of the client firms. Using the exogenous change in firms' bank dual holding due to bank mergers, we conduct difference-in-differences (DiD) tests to draw causal inferences. We find that firms that establish dual holding relationships with banks experience a three percent decrease in the effective tax rate than those that do not. The effect of dual holding is more pronounced when banks have larger equity or loan shares of the firm, have more expertise in tax assistance, or are specialists in the firm's industry. This effect is also stronger for client firms with more foreign income and unexploited tax-saving capacity.

Bio:

Dr. Qi is currently an Associate Professor in the Department of Economics and Finance at City University of Hong Kong, and is An Associate Editor of the Asia Pacific Journal of Accounting and Economics (APJAE). Ph.D. in Finance, Rutgers University, USA. Master of Finance, Chinese Min University, Andean University of Finance and Economics, With a Double Bachelor of Science in Investment and Law. Research interests: corporate finance, corporate finance and financial contracts, financial management of multinational companies, government-enterprise relations, law and finance. His papers are published in top international journals such as Journal of Financial Economics, The Accounting Review, Journal of Law and Economics, and Journal of International Business Research.

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