Topic：Parent-Subsidiary Common Managers and Corporate Tax Planning: Evidence from China
Presenter：Xin Wang Associate Professor The University of Hong Kong
Time：January 6, 2017（Friday） 10：00 - 11:30
Venue：Room 205, Jiageng Bld 2
Abstract：An interesting, but neglected phenomenon in the corporate governance practice of company’s subsidiaries is that top managers of the parent company are often appointed as directors or managers of the subsidiaries. These parent-subsidiary “common managers” can obtain first-hand internal knowledge about the firm’s operations and thus are better able to identify tax avoidance opportunities and to implement tax-reducing strategies. Using a unique hand-collected data of common managers for Chinese listed firms, we find that when a firm’s top managers (Chairmen, CEOs, and CFOs) take a position in the subsidiary, this firm has a lower effective income tax rate than other firms. The results are stronger for firms with more intangible assets, firms with related-party transactions in the past year, and firms with more diversified business segments. Moreover, the tax-reducing effect of common managers is more pronounced for those common managers who are also the CFOs of the parent company, for those who are the operating manager of the subsidiary company, and for those whose related subsidiaries play a more important role in the whole company’s performance. Our main conclusion holds for the effective tax rate based on cash-paid taxes, for both subsamples of SOE and non-SOE firms, for both subsamples of firms with or without multiple nominal tax rates. Furthermore, such an effect is robust to the change analysis and the 2SLS estimation