Customer and Tax Avoidance: How Does Customer Geographic Proximity Affect a Supplier’s Tax Avoidance?

This paper examines the effect of customer geographic proximity on supplier tax avoidance. Based 5135 Chinese firm–year observations from 2009 to 2020, we find a positive association between distance and Moreover, this is robust after studying endogeneity concerns. We further that information asymmetry detection risk are underlying mechanisms. also relation more pronounced in suppliers with high financial risk, competitive industrial sectors, weak marketization environments. Overall, our findings suggest localities within country an important factor affecting supplier’s motivation for Our research sheds light how change environment caused by differences impacts its strategy.