The effect of foreign institutional ownership on corporate tax avoidance: International evidence

Iftekhar Hasan, Incheol Kim, Haimeng Teng, Qiang Wu

Research output: Journal article publicationJournal articleAcademic researchpeer-review

Abstract

We find that foreign institutional investors (FIIs) reduce their investee firms’ tax avoidance. We provide evidence that the effect is driven by the institutional distance between FIIs’ home countries/regions and host countries/regions. Specifically, we find that the effect is driven by the influence of FIIs from countries/regions with high-quality institutions (i.e., common law, high government effectiveness, and high regulatory quality) on investee firms located in countries/regions with low-quality institutions. Furthermore, we show that the effect is concentrated on FIIs with little experience in the investee countries/regions or FIIs with stronger monitoring incentives. Finally, we find that FIIs are more likely to vote against management if the firm has a higher level of tax avoidance.

Original languageEnglish
Article number100440
JournalJournal of International Accounting, Auditing and Taxation
Volume46
DOIs
Publication statusPublished - Mar 2022

Keywords

  • Foreign institutional ownership
  • Institutional distance
  • Tax avoidance

ASJC Scopus subject areas

  • Accounting
  • Finance

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