Transformations  in
Business & Economics

Can Institutional Investors Influence Corporate Tax Activism? From the Perspective of Heterogeneous Institutional Investors
Na Yin, Yanjin Li

ABSTRACT: Institutional investors, as external shareholders with a high proportion of shares, have always been a hot topic. To explore the influence of heterogeneous institutional investors on corporate tax activism, using the data of China’s A-share listed companies from 2008 to 2020, multiple regression, quantile regression, PSM model, and Heckman two-stage test, the influence of different types of institutional investors shareholdings on corporate tax activism was analysed. Results show that the business cooperation between the pressure-sensitive institutional investors and the invested companies is limited to the former’s effective external supervision role and that the pressure‑resistant institutional investors relative to the independent interests of the invested companies can significantly restrain a corporate tax activism behaviour and reduce their corporate tax activism degree. Pressure‑resistant institutional investors play a leading role in curbing corporate tax activism and have the potential to influence other investors. In enterprises with low equity concentration and high equity checks and balances, pressure-resistant institutional investors can exert a strong external governance effect and restrain the tax activism behaviour of enterprises. The conclusions provide a novelty explanation for the factors that influence corporate tax activism. Only the pressure of institutional investors who focus on the long-term value of enterprises and have no business connections with investment enterprises can play a shareholder supervision role to influence corporate tax activism behaviour.

KEYWORDS:  institutional investors, tax activism, equity characteristics.

JEL classification:  D53, M12, M21.