Tax Avoidance, Corporate Governance and Corporate Innovation
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In the background of implementation the strategy of innovation-driven development, this paper investigates the impact of corporate tax avoidance on corporate innovation. Using applications of invention patents as a proxy of corporate innovation, we find that tax avoidance significantly reduce the firm’s innovation ability, which supports the agency cost hypothesis in corporate tax avoidance; and the negative relation between tax avoidance and corporate innovation will decrease with the improvement of corporate governance. This paper will contribute to the literature on economic consequences of corporate tax avoidance and influence factors of corporate innovation. It also has the important implication for our understanding for how to promote the corporate innovation by tax avoidance.
Corporate Tax Avoidance, Corporate Governance, Corporate Innovation.