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Tax avoidance and cost of debt: does integrated report assurance matter?

Nermine Medhioub (Research Unit in Economic and Financial Analysis and Modeling (URAMEF), Faculty of Economics and Management of Sfax, University of Sfax, Sfax, Tunisia)
Saoussen Boujelbene (Research Unit in Economic and Financial Analysis and Modeling (URAMEF), Sfax Business School, University of Sfax, Sfax, Tunisia)

Journal of Accounting in Emerging Economies

ISSN: 2042-1168

Article publication date: 9 February 2023

Issue publication date: 9 February 2024




This study examines the association between corporate tax avoidance and the cost of debt (COD). It also investigates the moderating effect of integrated report (IR) assurance on tax avoidance/COD relationship.


Based on a sample of 76 South African companies listed on the Johannesburg Stock Exchange (JSE) from 2010 to 2020, the authors built and estimated regression models using the feasible generalized least squares (FGLS) method. The authors significantly mitigated the endogeneity concerns using propensity score matching (PSM), difference-in-differences (DID) analysis and fixed effects regression.


The authors found that tax-avoiding firms pay higher costs of debt due to information asymmetries and agency problems. Bankers systematically reflect the increase in tax avoidance by adjusting the COD upward. However, results show that the assured IR disclosure mitigates these problems, which decreases the COD for tax avoidance strategies adopters. Using a quasi-natural experiment, well-grounded evidence was provided showing that the decrease in the COD for debtors who engage in tax avoidance practices is attributed to the availability of an assured IR.

Practical implications

This study provides plausible evidence in favor of the role that an assured IR can play in capital allocation decisions. Consequently, it is likely to push policymakers in South Africa and other countries to set standards for IR assurance.


This is the first study that investigates and validates the role of IR assurance in solving the controversy about the “tax saving effect” vs. “risk exposure effect” that bankers face while identifying debtors with successful (non-risky/cash-saving) tax avoidance practices and those with non-successful (risky) ones.



Medhioub, N. and Boujelbene, S. (2024), "Tax avoidance and cost of debt: does integrated report assurance matter?", Journal of Accounting in Emerging Economies, Vol. 14 No. 1, pp. 75-98.



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