Merchant guild culture and dynamic adjustment of corporate tax avoidance: evidence from China

Using A-share listed firms from the Shanghai and Shenzhen stock exchanges between 2007 and 2021 as the research sample, this article examines the impact of merchant guild culture on the speed at which firms adjust towards their target level of tax avoidance. The baseline results show that merchant guild culture significantly accelerates the adjustment speed. Mechanism analyses show that merchant guild culture enhances adjustment speed by improving internal coordination efficiency and reducing agency costs. Further research reveals that the enhancing effect of merchant guild culture on the adjustment speed is more pronounced when the actual level of tax avoidance is below the target. The promoting effect of merchant guild culture on tax adjustment speed is more evident in firms where the chairman’s place of origin or birthplace matches the registered location of the listed firm, those facing stronger product market competition, and those located in regions with weaker tax enforcement. This article not only identifies a new factor influencing tax avoidance adjustments, addressing a gap in the existing literature, but also examines the economic consequences of merchant guild culture from the perspective of tax management, providing insights into how merchant guild culture shapes corporate behaviour.