Political Status and Tax Haven Investment of Emerging Market Firms: Evidence from China

  • Ziliang Deng
  • Jiayan YanEmail author
  • Pei Sun
Original Paper


Tax haven investment has become an increasingly important topic in business ethics. Given the considerable tax haven investments from emerging market firms, understanding how home-country institutions shape their investments in tax havens is theoretically intriguing and practically crucial. By integrating resource dependence and institutional theories, we hypothesize the existence of a negative relationship between firms’ home-country political status and tax haven investment. State-owned enterprises (SOEs) controlled by the central government dominate the political hierarchy. Compared with other types of enterprises, central SOEs receive the strongest institutional support and are the most prone to institutional oversight, thereby exhibiting the weakest tendency to invest in tax havens. This top group is followed by SOEs controlled by local governments, politically connected private firms, and private firms without political connections. These groups exhibit an increasing tendency to invest in overseas tax havens. The empirical analysis of Chinese listed firms during 2003–2013 supports our hypotheses. This research contributes to the business ethics literature by identifying institutional drivers of overseas tax haven investment by emerging market firms, thereby adding to the ethical debate on international tax avoidance.


Tax avoidance Tax haven Political status Resource dependence theory Institutional theory Emerging market China 



We express our appreciation for the comments from the Section Editor Suhaib Riaz, three JBE reviewers, Alvaro Cuervo-Cazurra, Lorraine Eden, the audience, and reviewers on the earlier versions of this paper at SMS Special Conference 2016 (Hong Kong), Renmin University of China, AOM Annual Meetings 2017 (Atlanta), and SMS Annual Conference 2017 (Houston).


This study was funded by the National Natural Science Foundation of China (Grant Numbers 71772175 and 71672040) and Foundation of Humanities and Social Sciences, Ministry of Education, China (Grant Number 17YJA630011).

Compliance with Ethical Standards

Conflict of interest

The authors declare that they have no conflict of interest.

Ethical Approval

This article does not contain any studies with human participants or animals performed by any of the authors.


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© Springer Nature B.V. 2019

Authors and Affiliations

  1. 1.Renmin Business SchoolRenmin University of ChinaBeijingChina
  2. 2.Darla Moore School of BusinessUniversity of South CarolinaColumbiaUSA
  3. 3.School of ManagementFudan UniversityShanghaiChina

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