Research Highlights

This study examines how changes in ownership structure associated with Initial Public Offerings (IPOs) influence corporate tax avoidance and financial reporting behavior. While prior research has predominantly focused on earnings management before IPOs, limited attention has been given to tax reporting dynamics surrounding the listing process. Addressing this gap, the study investigates how the transition from private to public ownership affects the nature, magnitude, and timing of tax avoidance activities, using evidence from Chinese firms.

The analysis draws on key concepts including the book-tax tradeoff, book-tax differences (BTD), book-tax conformity (BTC), and the distinction between accrual-based (DAc) and real activities manipulations (RAM). Empirical findings reveal distinct patterns across the IPO lifecycle. In the pre-IPO stage, firms engaging in aggressive accrual-based reporting tend to exhibit higher levels of BTD-related tax avoidance, while real activities manipulation constrains BTC-related avoidance. Post-IPO, stricter scrutiny moderates BTD tax avoidance linked to accrual manipulation, whereas increases in real activities reversals are associated with greater BTC tax avoidance.

Overall, the results suggest a shift in tax compliance strategies following public listing, with BTD-driven avoidance declining and BTC-related practices increasing, reflecting evolving regulatory pressures and governance mechanisms.

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