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公司避稅與金字塔結構
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(Bertrand and Mullainathan, 2003), which predicts that managers expropriate wealth in
the easiest possible manner, avoid expropriation activities and legitimate activities that
require a great deal of risk and effort on the part of the manger; McGuire et al. (2014)
argues that firms whose managers have greater excess voting rights over cash flow rights
will exhibit less tax avoidance. Consistent with the quiet life theory, McGuire et al. (2014)
find that the dual class firms engage in lower level of tax avoidance than do the propensity
matched single class firms and that the extent of tax avoidance declines as the deviation
between voting rights and cash flow rights increases.
Our study is different from that of McGuire et al. (2014) in two aspects. First, they do
not test the agency theory developed by Desai and Dharmapala (2006), instead, the quiet
theory is tested. They test whether managers' preference for the quiet life leads to lower
levels of tax avoidance among dual class firms. However, ours is more akin to the tests of
Desai and Dharmpala (2006). According to Desai and Dharmpala (2006), dual-class firms
may engage in higher levels of tax avoidance because insiders view tax avoidance as a
means to expropriate wealth from shareholders (Francis, Schipper, and Vincent, 2005;
Masulis, Wang, and Xie, 2009). Second, McGuire et al. (2014) investigate tax avoidance
in the U.S., where corporate pyramids is not common. We explore another common
practice in East Asia that relates to the agency costs between controlling and non-
controlling shareholders-corporate pyramids.
2.4 Hypothesis Development
We expect that firms with a long span of corporate pyramid are associated with high
tax avoidance. One main reason is that the pyramidal structure is a convenient device for a
controlling shareholder to expropriate rents (Bebchuk et al., 2000; Morck et al., 2004).
The use of pyramidal structures could lead to agency costs between the controlling
shareholders and non-controlling shareholders. The corporate pyramid allows controlling
shareholders to exercise controlling power in excess of their cash flow rights via
pyramidal structures. The controlling shareholders can conduct tax avoidance activities by
creating complex structures (e.g., related-party transactions) to obscure the underlying
intent and to avoid detection by the government. Desai and Dharmapala (2006) argue that
tax avoidance activities comprising complex and obscure transactions make it easier for
controlling shareholders to hide rent extraction activities. While related-party transactions
can be promoted as saving taxes for the company of interest, the controlling shareholder
can benefit themselves by extract rents through affiliates. For example, they can buy assets