When Controlling Persons Have Shelters: The Effect of Foreign Residency Rights on Tax Credit Ratings

This paper examines the influence of controlling persons' foreign residency rights on corporate tax credit ratings (TCRs). The empirical results show that corporate TCRs decrease when the controlling person obtains foreign residency rights. The mechanism analysis indicates that there are three main channels, i.e. more tax avoidance behaviors, more earnings management and a higher frequency of violations. Our findings demonstrate that the controlling person's foreign residency rights are an indicator worthy of supervisors' attention. Tax authorities could strengthen the inspection of foreign-related tax activities.