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Impact of management’s irrational expectations on corporate tax avoidance: A mediating effect based on level of risk-taking

Frequent tax avoidance incidents have caused huge losses to corporate reputation and corporate value. Research is required on whether and how the irrational judgment of management, a powerful factor in corporate decision-making, affects corporate tax avoidance behavior. Taking all A-share listed com...

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Autores principales: Li, Lingyu, Wu, Qing
Formato: Online Artículo Texto
Lenguaje:English
Publicado: Frontiers Media S.A. 2022
Materias:
Acceso en línea:https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9724620/
https://www.ncbi.nlm.nih.gov/pubmed/36483701
http://dx.doi.org/10.3389/fpsyg.2022.993045
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author Li, Lingyu
Wu, Qing
author_facet Li, Lingyu
Wu, Qing
author_sort Li, Lingyu
collection PubMed
description Frequent tax avoidance incidents have caused huge losses to corporate reputation and corporate value. Research is required on whether and how the irrational judgment of management, a powerful factor in corporate decision-making, affects corporate tax avoidance behavior. Taking all A-share listed companies from 2006 to 2020 as a sample, this paper empirically tests the relationships among management’s irrational expectations, level of corporate risk-taking, and level of corporate tax avoidance using an fixed effects regression model (FEM). The results of the three-stage regression model and Sobel test suggest that the level of corporate risk-taking plays a mediating role between managers’ irrational expectations and Corporate tax avoidance. The managers’ stockholding plays a moderating role in this process. This study also finds evidence that the irrational expectations of management lead to an increase in levels of research and development manipulation, which indirectly increases the level of corporate tax avoidance. Therefore, to control the risk caused by managers’ risky decisions, such as R&D manipulation and tax avoidance, it is necessary to lessen the effects of irrational expectations of management, and the management equity incentive plan has been identified as a reliable method in the risk reduction process.
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spelling pubmed-97246202022-12-07 Impact of management’s irrational expectations on corporate tax avoidance: A mediating effect based on level of risk-taking Li, Lingyu Wu, Qing Front Psychol Psychology Frequent tax avoidance incidents have caused huge losses to corporate reputation and corporate value. Research is required on whether and how the irrational judgment of management, a powerful factor in corporate decision-making, affects corporate tax avoidance behavior. Taking all A-share listed companies from 2006 to 2020 as a sample, this paper empirically tests the relationships among management’s irrational expectations, level of corporate risk-taking, and level of corporate tax avoidance using an fixed effects regression model (FEM). The results of the three-stage regression model and Sobel test suggest that the level of corporate risk-taking plays a mediating role between managers’ irrational expectations and Corporate tax avoidance. The managers’ stockholding plays a moderating role in this process. This study also finds evidence that the irrational expectations of management lead to an increase in levels of research and development manipulation, which indirectly increases the level of corporate tax avoidance. Therefore, to control the risk caused by managers’ risky decisions, such as R&D manipulation and tax avoidance, it is necessary to lessen the effects of irrational expectations of management, and the management equity incentive plan has been identified as a reliable method in the risk reduction process. Frontiers Media S.A. 2022-11-18 /pmc/articles/PMC9724620/ /pubmed/36483701 http://dx.doi.org/10.3389/fpsyg.2022.993045 Text en Copyright © 2022 Li and Wu. https://creativecommons.org/licenses/by/4.0/This is an open-access article distributed under the terms of the Creative Commons Attribution License (CC BY). The use, distribution or reproduction in other forums is permitted, provided the original author(s) and the copyright owner(s) are credited and that the original publication in this journal is cited, in accordance with accepted academic practice. No use, distribution or reproduction is permitted which does not comply with these terms.
spellingShingle Psychology
Li, Lingyu
Wu, Qing
Impact of management’s irrational expectations on corporate tax avoidance: A mediating effect based on level of risk-taking
title Impact of management’s irrational expectations on corporate tax avoidance: A mediating effect based on level of risk-taking
title_full Impact of management’s irrational expectations on corporate tax avoidance: A mediating effect based on level of risk-taking
title_fullStr Impact of management’s irrational expectations on corporate tax avoidance: A mediating effect based on level of risk-taking
title_full_unstemmed Impact of management’s irrational expectations on corporate tax avoidance: A mediating effect based on level of risk-taking
title_short Impact of management’s irrational expectations on corporate tax avoidance: A mediating effect based on level of risk-taking
title_sort impact of management’s irrational expectations on corporate tax avoidance: a mediating effect based on level of risk-taking
topic Psychology
url https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9724620/
https://www.ncbi.nlm.nih.gov/pubmed/36483701
http://dx.doi.org/10.3389/fpsyg.2022.993045
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