Have library access?
  • Journals

Can Institutional Investors Effectively Reduce the Influence of Tax Avoidance Behavior on Cost of Debt?



This study investigates the influence of tax avoidance on the cost of debt and its interaction effect with institutional investors. The empirical results indicate that a substitution relationship exists between tax avoidance and the cost of debt among firms in Taiwan. The results imply that the tax-savings effect of tax avoidance dominates managerial opportunism in the relationship between tax avoidance and the cost of debt for Taiwanese firms. Moreover, the result suggests that firms with larger institutional holdings have a lower cost of debt, implying that institutional investors can reduce information asymmetry and managerial rent diversions related to tax avoidance, thereby amplifying the negative effect of tax avoidance on the cost of debt. Our findings contribute to research on tax avoidance by providing direct evidence on how debtholders in Taiwan perceive corporate tax avoidance. Based on our findings, firms are encouraged to implement or strengthen their corporate governance by strengthening the role of institutional investors.

Parallel abstracts


Parallel keywords

避稅 資金成本 機構投資人


Al-Najjar, B.,Taylor, P.(2008).The relationship between capital structure and ownership structure: New evidence from Jordanian panel data.Managerial Finance.34(12),919-933.
Ashbaugh-Skaife, H.,Collins, D. W.,LaFond, R.(2006).The effects of corporate governance on firms' credit ratings.Journal of Accounting and Economics.42(1-2),203-243.
Attig, N.,Cleary, S.,Ghoul, S. E.,Guedhami, O.(2013).Institutional investment horizons and the cost of equity capital.Financial Management.42(2),441-477.
Barnea, A.,Haugen, R. A.,Senbet, L. W.(1981).An equilibrium analysis of debt financing under costly tax arbitrage and agency problems.The Journal of Finance.36(3),569-581.
Bartelsman, E. J.,Beetsma, R. M. W. J.(2003).Why pay more? Corporate tax avoidance through transfer pricing in OECD countries.Journal of Public Economics.87(9-10),2225-2252.