Table 11 Instrumental variable two-stage...

Table 11

Instrumental variable two-stage least squares

Dependent variable =	The first IV				The second IV
	Financial_D	ETR1	Financial_Ratio	ETR1	Financial_D	ETR1	Financial_Ratio	ETR1
	First stage	Second stage	First stage	Second stage	First stage	Second stage	First stage	Second stage
	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)
Predicted_Financial		−0.298***		−1.244***		−0.313***		−1.201***
Predicted_Financial		(−3.102)		(−3.066)		(−3.208)		(−3.250)
Percentage_FinancialCEO_Province	0.478***		0.115***
Percentage_FinancialCEO_Province	(5.752)		(5.513)
Percentage_FinancialExe_Province					0.692***		0.180***
Percentage_FinancialExe_Province					(5.745)		(5.993)
SOE	−0.101***	−0.027**	−0.020***	−0.022**	−0.103***	−0.029***	−0.020***	−0.021**
SOE	(−13.066)	(−2.560)	(−10.248)	(−2.377)	(−13.257)	(−2.662)	(−10.448)	(−2.458)
Size	0.017***	0.017***	−0.002**	0.010***	0.017***	0.017***	−0.002**	0.010***
Size	(5.766)	(7.150)	(−2.062)	(5.776)	(5.769)	(7.155)	(−2.086)	(5.911)
Age	0.006	0.000	0.007***	0.007*	0.006	0.001	0.007***	0.007**
Age	(1.460)	(0.198)	(6.513)	(1.940)	(1.429)	(0.237)	(6.466)	(1.969)
Tangibility	−0.132***	−0.015	−0.015	0.006	−0.128***	−0.017	−0.014	0.007
Tangibility	(−3.512)	(−0.631)	(−1.559)	(0.280)	(−3.415)	(−0.698)	(−1.477)	(0.309)
Lev	0.006	0.031***	−0.003	0.026**	0.008	0.031***	−0.002	0.026**
Lev	(0.337)	(3.059)	(−0.605)	(2.467)	(0.449)	(3.014)	(−0.454)	(2.518)
RD	−1.259***	−1.043***	−0.427***	−1.198***	−1.278***	−1.061***	−0.433***	−1.180***
RD	(−5.644)	(−6.157)	(−7.646)	(−5.723)	(−5.725)	(−6.171)	(−7.751)	(−6.000)
ROA	0.021	0.148***	0.042***	0.194***	0.025	0.149***	0.043***	0.192***
ROA	(0.337)	(4.232)	(2.642)	(4.962)	(0.390)	(4.180)	(2.703)	(5.037)
Growth	0.017***	0.018***	0.003***	0.017***	0.017***	0.018***	0.003***	0.017***
Growth	(3.356)	(5.442)	(2.672)	(5.341)	(3.374)	(5.443)	(2.679)	(5.434)
Duality	0.010	0.005	0.005**	0.008*	0.010	0.005	0.005**	0.008*
Duality	(1.332)	(1.178)	(2.494)	(1.702)	(1.286)	(1.197)	(2.441)	(1.697)
Independence	0.037	0.054*	0.020	0.068**	0.031	0.055*	0.018	0.067**
Independence	(0.661)	(1.748)	(1.421)	(2.101)	(0.560)	(1.745)	(1.303)	(2.105)
Female	−0.015	0.022	0.006	0.034*	−0.016	0.021	0.006	0.033*
Female	(−0.500)	(1.274)	(0.814)	(1.936)	(−0.507)	(1.253)	(0.772)	(1.940)
Loss	0.011	−0.018**	0.006*	−0.013*	0.011	−0.017**	0.006**	−0.013*
Loss	(0.826)	(−2.454)	(1.944)	(−1.704)	(0.853)	(−2.395)	(1.965)	(−1.775)
TotalAccruals	0.148***	0.025	0.025**	0.012	0.146***	0.027	0.024**	0.010
TotalAccruals	(3.642)	(0.925)	(2.445)	(0.464)	(3.606)	(0.996)	(2.397)	(0.429)
TMT_Age	−0.320***	−0.111***	−0.103***	−0.144***	−0.324***	−0.116***	−0.104***	−0.140***
TMT_Age	(−7.519)	(−2.966)	(−9.684)	(−3.080)	(−7.594)	(−3.042)	(−9.792)	(−3.207)
TMT_Foreign	0.187***	0.076***	0.066***	0.102***	0.184***	0.079***	0.065***	0.099***
TMT_Foreign	(6.353)	(3.081)	(8.937)	(3.204)	(6.254)	(3.151)	(8.813)	(3.339)
TMT_Academic	0.121***	0.037**	0.034***	0.044**	0.117***	0.039**	0.033***	0.042**
TMT_Academic	(4.956)	(2.084)	(5.574)	(2.232)	(4.788)	(2.155)	(5.391)	(2.269)
_cons	1.071***	0.171	0.434***	0.391**	1.073***	0.186	0.436***	0.373**
_cons	(6.135)	(1.242)	(9.939)	(1.987)	(6.143)	(1.333)	(9.973)	(2.035)
Year fixed effects?	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Industry fixed effects?	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
First-stage Cragg and Donald test	p = 0.0000	/	p = 0.0000	/	p = 0.0000	/	p = 0.0000	/
Minimum eigenvalue statistic	33.0874	/	30.3976	/	33.0074	/	35.9147	/
Wald χ²	/	825.4	/	806.51	/	803.1	/	824.31
Adjusted R²	0.073	/	0.072	/	0.073	/	0.072	/
No. of obs	18,429	18,429	18,429	18,429	18,429	18,429	18,429	18,429

Dependent variable =	The first IV				The second IV
	Financial_D	ETR1	Financial_Ratio	ETR1	Financial_D	ETR1	Financial_Ratio	ETR1
	First stage	Second stage	First stage	Second stage	First stage	Second stage	First stage	Second stage
	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)
Predicted_Financial		−0.298***		−1.244***		−0.313***		−1.201***
Predicted_Financial		(−3.102)		(−3.066)		(−3.208)		(−3.250)
Percentage_FinancialCEO_Province	0.478***		0.115***
Percentage_FinancialCEO_Province	(5.752)		(5.513)
Percentage_FinancialExe_Province					0.692***		0.180***
Percentage_FinancialExe_Province					(5.745)		(5.993)
SOE	−0.101***	−0.027**	−0.020***	−0.022**	−0.103***	−0.029***	−0.020***	−0.021**
SOE	(−13.066)	(−2.560)	(−10.248)	(−2.377)	(−13.257)	(−2.662)	(−10.448)	(−2.458)
Size	0.017***	0.017***	−0.002**	0.010***	0.017***	0.017***	−0.002**	0.010***
Size	(5.766)	(7.150)	(−2.062)	(5.776)	(5.769)	(7.155)	(−2.086)	(5.911)
Age	0.006	0.000	0.007***	0.007*	0.006	0.001	0.007***	0.007**
Age	(1.460)	(0.198)	(6.513)	(1.940)	(1.429)	(0.237)	(6.466)	(1.969)
Tangibility	−0.132***	−0.015	−0.015	0.006	−0.128***	−0.017	−0.014	0.007
Tangibility	(−3.512)	(−0.631)	(−1.559)	(0.280)	(−3.415)	(−0.698)	(−1.477)	(0.309)
Lev	0.006	0.031***	−0.003	0.026**	0.008	0.031***	−0.002	0.026**
Lev	(0.337)	(3.059)	(−0.605)	(2.467)	(0.449)	(3.014)	(−0.454)	(2.518)
RD	−1.259***	−1.043***	−0.427***	−1.198***	−1.278***	−1.061***	−0.433***	−1.180***
RD	(−5.644)	(−6.157)	(−7.646)	(−5.723)	(−5.725)	(−6.171)	(−7.751)	(−6.000)
ROA	0.021	0.148***	0.042***	0.194***	0.025	0.149***	0.043***	0.192***
ROA	(0.337)	(4.232)	(2.642)	(4.962)	(0.390)	(4.180)	(2.703)	(5.037)
Growth	0.017***	0.018***	0.003***	0.017***	0.017***	0.018***	0.003***	0.017***
Growth	(3.356)	(5.442)	(2.672)	(5.341)	(3.374)	(5.443)	(2.679)	(5.434)
Duality	0.010	0.005	0.005**	0.008*	0.010	0.005	0.005**	0.008*
Duality	(1.332)	(1.178)	(2.494)	(1.702)	(1.286)	(1.197)	(2.441)	(1.697)
Independence	0.037	0.054*	0.020	0.068**	0.031	0.055*	0.018	0.067**
Independence	(0.661)	(1.748)	(1.421)	(2.101)	(0.560)	(1.745)	(1.303)	(2.105)
Female	−0.015	0.022	0.006	0.034*	−0.016	0.021	0.006	0.033*
Female	(−0.500)	(1.274)	(0.814)	(1.936)	(−0.507)	(1.253)	(0.772)	(1.940)
Loss	0.011	−0.018**	0.006*	−0.013*	0.011	−0.017**	0.006**	−0.013*
Loss	(0.826)	(−2.454)	(1.944)	(−1.704)	(0.853)	(−2.395)	(1.965)	(−1.775)
TotalAccruals	0.148***	0.025	0.025**	0.012	0.146***	0.027	0.024**	0.010
TotalAccruals	(3.642)	(0.925)	(2.445)	(0.464)	(3.606)	(0.996)	(2.397)	(0.429)
TMT_Age	−0.320***	−0.111***	−0.103***	−0.144***	−0.324***	−0.116***	−0.104***	−0.140***
TMT_Age	(−7.519)	(−2.966)	(−9.684)	(−3.080)	(−7.594)	(−3.042)	(−9.792)	(−3.207)
TMT_Foreign	0.187***	0.076***	0.066***	0.102***	0.184***	0.079***	0.065***	0.099***
TMT_Foreign	(6.353)	(3.081)	(8.937)	(3.204)	(6.254)	(3.151)	(8.813)	(3.339)
TMT_Academic	0.121***	0.037**	0.034***	0.044**	0.117***	0.039**	0.033***	0.042**
TMT_Academic	(4.956)	(2.084)	(5.574)	(2.232)	(4.788)	(2.155)	(5.391)	(2.269)
_cons	1.071***	0.171	0.434***	0.391**	1.073***	0.186	0.436***	0.373**
_cons	(6.135)	(1.242)	(9.939)	(1.987)	(6.143)	(1.333)	(9.973)	(2.035)
Year fixed effects?	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Industry fixed effects?	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
First-stage Cragg and Donald test	p = 0.0000	/	p = 0.0000	/	p = 0.0000	/	p = 0.0000	/
Minimum eigenvalue statistic	33.0874	/	30.3976	/	33.0074	/	35.9147	/
Wald χ²	/	825.4	/	806.51	/	803.1	/	824.31
Adjusted R²	0.073	/	0.072	/	0.073	/	0.072	/
No. of obs	18,429	18,429	18,429	18,429	18,429	18,429	18,429	18,429

Note(s): This table reports the results of the IV-2SLS estimation examining the effect of financially experienced top executives on corporate tax avoidance. We construct two province-level instruments: (1) Percentage_FinancialCEO_Province, defined as the proportion of CEOs with prior financial institution experience among all CEOs in the same province in the preceding year, excluding the focal firm; and (2) Percentage_FinancialExe_Province, calculated as the ratio of financially experienced top executives to all top executives in other firms within the same province in the prior year. All models control for industry- and year-level fixed effects. All control variables are lagged by one year except for Growth and Loss. ***, **, and * indicate significance at the 1%, 5%, and 10% levels, respectively

Source(s): Authors’ own work

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