Abstract

This study investigates the relationship between the period after listing date (hereinafter, listing period) and tax avoidance of firms and analyzes how the CEO’s stock holdings affect this relationship. Specifically, the study identifies the company’s tax－related behavior after listing and investigate the effect of the CEO’s stock holdings on this. The sample covers 12,891 company－years from 2011 to 2021, after the adoption of Korean adopted International Financial Reporting Standards. The listing period, interest variable, is the natural logarithm of the number of days since listing, and the proxy for tax avoidance, dependent variable, is the 5－year average cash and accounting effective tax rate, and measurements by Desai and Dharmapala (2006). Main analysis results are as follows. First, there is a significant negative relationship between the listing period and corporate tax avoidance. This means that in the early stages of listing, companies show a relatively high degree of tax avoidance in order to secure available resources for business expansion. However, the longer the period after listing, the smaller the difference between accounting and tax profits due to cost reduction through stabilization of business, and the lower the degree of tax avoidance due to long－term monitoring by regulatory agencies. Second, the negative relationship between listing period and tax avoidance was significant only in the sample where the CEO held stocks. This result suggests that the higher the CEO’s level of alignment with the company’s economic interests, the more consistently CEO makes tax－related strategic choices after listing. This study has the following contributions and policy implications. First, this study shows that the listing period has a negative relationship with tax avoidance, making a contribution by suggesting that the post－listing period can act as one of the determinants of tax avoidance in addition to the company’s age or life cycle. Second, this study suggests that the listing period can be a signal that can differentially indicate a company’s ability and motivation to avoid taxes, providing policy implications for tax policy authorities.

Keywords

• post－listing period
• tax avoidance
• CEO
• stock holding
• effective tax rate

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