When Shareholders Are Also Creditors: Evidence on Corporate Tax Avoidance

DOI

10.2991/978-94-6239-774-3_25How to use a DOI?

Keywords

Institutional dual ownership; Dual holders; Corporate tax avoidance; Shareholder–creditor conflict; Tax planning

Abstract

This study examines how institutional investors’ simultaneous debt and equity positions shape corporate tax avoidance. Because dual holders share in both equity-side tax benefits and debt-side downside risk, they may alter firms’ tax planning incentives. Using U.S. public firms from 1990 to 2010, we find that firms with institutional dual holders report lower effective tax rates. The evidence remains robust to firm fixed effects and alternative tax avoidance proxies. We further exploit mergers between lenders and institutional shareholders as shocks to dual ownership. Difference-in-differences tests show that treated firms reduce their effective tax rates after dual ownership increases. The effect is stronger when institutional monitoring is weaker, leverage is higher, and default risk is lower. Overall, the findings suggest that dual holders influence tax policy by weighing tax savings against creditor risk.

Copyright

© 2026 The Author(s)

Open Access

Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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TY  - CONF
AU  - Jialu Li
PY  - 2026
DA  - 2026/09/11
TI  - When Shareholders Are Also Creditors: Evidence on Corporate Tax Avoidance
BT  - Proceedings of the 2026 5th International Conference on Mathematical Statistics and Economic Analysis (MSEA 2026
PB  - Atlantis Press
SP  - 284
EP  - 293
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6239-774-3_25
DO  - 10.2991/978-94-6239-774-3_25
ID  - Li2026
ER  -