Customer–supplier relationships and corporate tax avoidance

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

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Related Research Unit(s)

Detail(s)

Original languageEnglish
Pages (from-to)377-394
Journal / PublicationJournal of Financial Economics
Volume123
Issue number2
Online published22 Sep 2016
Publication statusPublished - Feb 2017

Abstract

We investigate whether firms in close customer–supplier relationships are better able to identify and implement tax avoidance strategies via supply chains. Consistent with our prediction, we find that both principal customers and their dependent suppliers avoid more taxes than other firms. Further analysis suggests that principal customers and dependent suppliers likely engage in tax strategies involving shifting profits to tax haven subsidiaries. Moreover, tax benefits appear to explain both principal customer firms’ and dependent supplier firms’ organizational decisions. Overall, our study provides evidence of the importance of tax avoidance as a source of gains from these relationships.

Research Area(s)

  • Customers, Industrial organization, Suppliers, Supply chain, Tax avoidance

Citation Format(s)

Customer–supplier relationships and corporate tax avoidance. / Cen, Ling; Maydew, Edward L.; Zhang, Liandong; Zuo, Luo.

In: Journal of Financial Economics, Vol. 123, No. 2, 02.2017, p. 377-394.

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review