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Corporate tax avoidance and stock price crash risk: the moderating effects of corporate governance

Hanh Minh Thai (School of Economics and Management, Hanoi University of Science and Technology, Hanoi, Viet Nam)
Khue Ngoc Dang (FPT Software Company, Hanoi, Viet Nam)
Normaziah Mohd Nor (Universiti Putra Malaysia, Serdang, Malaysia)
Hien Thi Nguyen (FAC Auditing Company, Hanoi, Viet Nam)
Khiem Van Nguyen (Hai Phong Greating Fortune Container Joint Stock Company, Hai Phong, Viet Nam)

International Journal of Emerging Markets

ISSN: 1746-8809

Article publication date: 17 February 2023

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Abstract

Purpose

This study aims to investigate the relationship between corporate tax avoidance and stock price crash risk and the moderating effects of corporate governance.

Design/methodology/approach

This study investigates the relationship between corporate tax avoidance and stock price crash risk using the sample consisting of listed firms in Vietnam for the period of 2011–2020 using panel regressions.

Findings

The authors find that there is a positive relationship between tax avoidance and stock price crash risk. Foreign ownership weakens the impacts of tax avoidance on stock price crash risk, while managerial ownership strengthens the impacts. Female Chief Executive Officers (CEOs) and female chairpersons weaken this relationship. Board gender diversity and state ownership have insignificant moderating impacts.

Practical implications

These findings could help the stock market build better internal monitoring mechanisms to reduce the impacts of tax avoidance on future stock price crash risk. Investors can recognize the characteristics of corporate governance, especially foreign ownership, managerial ownership, female CEOs and female chairpersons when making investment decisions. The policy makers should consider policies to attract foreign investment and support women entrepreneurship.

Originality/value

This paper contributes to the literature on the impacts of tax avoidance on stock price crash risk in emerging countries. This paper is the first to investigate the influence of corporate governance mechanisms including state ownership, foreign ownership, female CEOs and chairpersons and board gender diversity on this relationship.

Keywords

Acknowledgements

The authors thank Dr. Ilan Alon, the Editor in Chief of the International Journal of Emerging Markets (IJOEM), Dr. Aviral Kumar Tiwari, the Editor of IJOEM, three anonymous reviewers, Professor Rezaul Kabir, Professor Hisham Farag, Professor Sabri Boubaker and the participants at the International Conference on Emerging Challenges (2019, 2021) for many useful comments and discussions on the previous versions of the paper.

Citation

Thai, H.M., Dang, K.N., Nor, N.M., Nguyen, H.T. and Nguyen, K.V. (2023), "Corporate tax avoidance and stock price crash risk: the moderating effects of corporate governance", International Journal of Emerging Markets, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/IJOEM-11-2021-1767

Publisher

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Emerald Publishing Limited

Copyright © 2023, Emerald Publishing Limited

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