OWNERSHIP CONCENTRATION AND TAX AVOIDANCE: WHAT IF THE STATE IS THE CONTROLLING SHAREHOLDER?
Keywords:
Ownership concentration, State control, Tax avoidanceAbstract
This study aimed to determine to what extent ownership concentration influences tax avoidance behaviors of state control firms. We quantified tax avoidance with two metrics proposed by Atwood et al. (2012) and Tang (2015). Based on reference forms, we calculated the percentage of ownership concentration for each firm in the sample, including all firms traded on B3 in 2010-2017, represented by 1740-1781 observations. We scored state ownership with a dummy variable. We found a positive and significant association between firms with majority state ownership and the tax avoidance metric TA1 (percentage of current expenditures paid by the firm). When the interaction variable ‘ownership concentration x state control’ was inserted into the model, the coefficient was positive and significant (indicating that the higher the percentage of state-owned shares, the smaller the likelihood of engagement in tax avoidance). In contrast, while the association between ownership concentration and TA1 was negative and significant. Thus, we may infer that firms with low ownership concentration tend to adopt more aggressive fiscal practices. There is evidence that the higher the percentage of ownership concentration of companies with majority state control, the lower the level of aggressive fiscal practices and, consequently, the lower the adoption of strategies that aim to improve the company's cash flow and the amount of resources available for distribution to shareholders.
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