2023

Qin Jiaojiao; Lin Jun; Xin Yan

This study provides a new behavioral explanation of corporate tax avoidance. Drawing on tax avoidance research and the insights from performance feedback literature, we identify performance above aspiration as an important antecedent of corporate tax avoidance. We also explore the contingency effect of CEO experience since it may influence how the CEO views performance above aspiration and implement tax avoidance decisions. This study considers two main aspects of CEO experience: CEO tenure (firm experience) and CEO financial experience (functional experience). Using a panel sample of Chinese listed companies from 2009 to 2018, we find that as performance rises above aspiration, firms increase tax avoidance at first, but, from a certain point onwards, they reduce such activities. We also find that this inverted U-shaped relationship is weakened by CEO tenure but strengthened by CEO financial experience.