Insurance Institutional Investors and Corporate Tax Avoidance

ABSTRACT This paper investigates the impact of insurance institutional investors on corporate tax avoidance. Using data from Chinese listed firms, we find that higher insurance institutional ownership leads to lower levels of tax avoidance. In terms of the underlying mechanisms, we find that higher insurance institutional ownership is associated with lower corporate risk‐taking and agency costs. This is consistent with insurance institutional investors improving performance stability, promoting regulatory compliance and constraining aggressive tax planning. Cross‐sectional tests based on managerial ownership, CEO age, strategy deviance and tax enforcement further validate the role of insurance investors in curbing risky tax‐saving activities.