Ownership Concentration, State Ownership, and Effective Tax Rates: Evidence from China's Listed Firms

This paper examines the effect of ownership concentration and state ownership on the tax reporting practices of China's publicly listed firms. I argue that ownership concentration and state ownership are important for tax reporting practices in China because listed firms have high ownership concentrations and high levels of state ownership. Using a sample of 758 listed Chinese firms over the 1998-2008 time period, I find that firms with concentrated share ownership have lower effective tax rates. I also find that firms whose largest shareholders are government related have higher effective tax rates compared to firms whose largest shareholders are nongovernment related. In other words, the nature of the largest shareholder (government vs. nongovernment) matters. I also show that ownership-concentrated firms are able to achieve preferential statutory tax rates compared to firms with low ownership concentration regardless of the identity of the largest shareholder.