The governance role of lender monitoring: Evidence from Borrowers' tax planning

We posit that lender monitoring increases the general outcomes of borrowers' tax avoidance while reducing opportunistic tax aggressive behaviors. We identify four lender related monitoring measures that could affect borrowers' tax planning. We find firms with a larger portion of loan share...

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Bibliographic Details
Published inAdvances in accounting Vol. 63; p. 100679
Main Authors Zhou, Fuzhao, Shao, Pei, Xie, Feixue, Huang, Jianning
Format Journal Article
LanguageEnglish
Published Elsevier Ltd 01.12.2023
Subjects
Agency cost
Bank monitoring
Corporate governance
Financial distress
Tax avoidance
Tax planning
Corporate governance
G21
Tax avoidance
G34
Tax planning
Agency cost
M41
H26
Bank monitoring
Financial distress
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Summary:We posit that lender monitoring increases the general outcomes of borrowers' tax avoidance while reducing opportunistic tax aggressive behaviors. We identify four lender related monitoring measures that could affect borrowers' tax planning. We find firms with a larger portion of loan shares held by lead lenders, with loans led by reputable lenders, and with a single lending relationship to have more tax avoidance and less tax aggressiveness, and firms with loan sales that weaken lenders' monitoring incentives to have less tax avoidance and more tax aggressiveness. We further find the lender monitoring effect on tax planning to be more pronounced for firms closer to financial distress and bankruptcy.
ISSN:0882-6110
2590-1699
DOI:10.1016/j.adiac.2023.100679