The Nature of Ultimate Shareholders and Corporate Tax Planning

Using a sample of Chinese listed firms whose ultimate shareholders' nature of equity had been changed from the period 2000 to 2011, this study suggests that the change of ultimate shareholders' equity nature has a significant effect on corporate tax planning activities. We find that after stated owned enterprises (SOEs) become non SOEs, firms tend to adopt more aggressive tax avoidance behaviors, while if non SOEs change into SOEs, they have less tax avoidance relatively. Further analysis indicates that non SOEs are more likely to engage in tax avoidance behaviors than SOEs. These results are consistent with the viewpoint that ownership property plays an important role in corporate tax planning activities. Our paper contributes to the understanding of the relation between ownership property and tax reporting behaviors.