This study designed an EEG experiment about the effects of managerial tax avoidance on firm value. A combination of behavioural experiment and neuroscience experiment (event-related potentials) was conducted to understand the cognitive psychological processes and related neural mechanisms of management personnel before and aftertax avoidance. By using the data of Chinese A-share listed companies in 2008-2015, this paper studied the effect of corporate tax avoidance behaviour on firm value and analysed its mechanism of action. Based on the analysis of behavioural data and EEG data, it concludes that the corporate tax avoidance behaviour can increase the firm value, and the well-governed firms can also increase the firm value by reducing the entrusted agency fees generated by tax avoidance. Therefore, it enriches the research on Chinese tax avoidance agency issue, being of a certain guiding significance for the firms and taxation departments.

Tax Avoidance, Entrusted Agency, Rent-Seeking; Substitution Effect, Complementary Effect, EEG Experiment, Neuroscience