Search results

This paper aims to study the impact of tax avoidance on corporate risk. It also examines the moderating impact of tax risk on the relationship between tax avoidance and firm risk.

Based on available information in the DATASTREAM database about a sample of French firms listed in the CAC 40 from 2010 to 2022, the study uses the feasible generalized least squares method to investigate the impact of tax avoidance on firm risk and the moderating impact of tax risk. To check the robustness of our results, the authors changed the measurement of variables to identify potential biases and they significantly mitigated the endogeneity concerns using instrumental variable regression. Additional estimations were performed, first by using book-tax differences (BTD) and its components, i.e. temporary and permanent, and second by retesting hypotheses of years before the outbreak of the corona virus disease 2019 (COVID-19) pandemic.

The results show that tax avoidance negatively affects the firm risk while tax risk has a positive effect on firm risk. More importantly, tax risk moderates the negative impact of tax avoidance on the firm risk. When tax avoidance is associated with a high level of tax risk, it leads to a high firm risk. Accordingly, tax avoidance should be considered in conjunction with tax risk when studying the effect put on the firm risk. Further analyses indicate that tax risk moderates the negative relationship between permanent BTD and firm risk.

The major limitation of this study is that it focuses only on French-listed firms, which make it difficult to generalize the results. Furthermore, the authors did not introduce governance variables into our models. An effective governance system and transparent information can reduce some of the perverse effects of risky tax avoidance by reducing the tax avoidance costs. The obtained results are of great interest to researchers who need to include the tax risk concept in their examination of the tax avoidance impacts.

The results are useful for investors wishing to make sound decisions regarding risky tax avoidance practices. Furthermore, the results may signal the need for French policymakers to make more efforts to reduce risky tax avoidance activities that are harmful to investors. They must enforce the existence and the reporting of a tax risk management strategy by firms.

This study contributes to the growing body of literature on the tax avoidance effects with a special focus on firm risk. This study provides the first French evidence of the role of tax risk in the relationship between tax avoidance and firm risk.

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

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.

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.

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.

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.

The purpose of this study is to examine the interactive impact of tax avoidance and tax risk on the firm value.

This study covers 290 observations on non-financial corporations listed on the Tunisian Stock Exchange for the period ranging from 2008 to 2020, using the multiple linear regression technique.

The results show that tax avoidance positively affects the firm value while tax risk has a negative influence on the company value. More importantly, tax risk moderates the positive impact of tax avoidance on the firm value. Accordingly, tax avoidance must be considered in conjunction with tax risk when studying the effect on the firm value. The findings of additional analyses indicate that when tax avoidance is associated with a high level of tax risk, it negatively affects the firm value. Thus, investors negatively rate the high-risk tax avoidance.

The major limitation of this study is that it focuses only on Tunisian listed companies since their financial statements are publicly available. Although the sample is relatively small due to the problem of data availability, it is satisfactory owing to the twelve-year sampling period (from 2008 to 2020). Research implications- The results obtained are of great interest to researchers as they should be more careful in simply using effective tax rates as a measure of risky or aggressive tax avoidance.

The findings may signal the need for Tunisian firm managers to consider spillovers when adopting risky tax avoidance strategies and to implement a tax risk management policy within the firm. They are also substantial for Tunisian regulators to create requirements for reporting risky tax avoidance practices in the company annual reports to protect the investors’ rights and the society interest in general. The results are also useful for the investors who would like to make good decisions with respect to tax planning strategies. It is not enough to rely on the Effective Tax Rate (ETR) to judge whether or not tax planning is risky. Volatile ETRs, as a proxy of the tax risk, can be useful for them in decision-making.

The results also highlight that risky tax avoidance decreases the firm value, and thus confirm the negative repercussions that such behavior can have not only on the firm, but also on the society in general, as the corporate tax contributes to covering the State public expenditure. Hence, it is considered a general concern.

The present study differs from others in the existing literature. In fact, it examines the joint effect of tax avoidance and tax risk on the firm value for Tunisian listed companies which are characterized by the predominance of agency conflicts between major shareholders and minor ones. Therefore, the authors seek to investigate if small shareholders can penalize risky tax avoidance practices by decreasing the firm value.

The purpose of this paper is to investigate whether tax avoidance has a positive or negative effect on firms’ cost of debt. It further investigates whether the implications for the cost of debt are different for tax avoidance and tax risk.

Based on a sample of 201 firms listed on Frankfurt Stock Exchange from 2009 to 2014, three tests are performed using pooled OLS regression. Controlling for numerous variables that have been found to influence the cost of debt, a first model examines the relationship between tax avoidance and the cost of debt. A second model examines the relationship between tax risk and the cost of debt and a third model interacts tax avoidance with tax risk.

The results show that tax avoidance has a negative effect on the cost of debt; however, tax risk increases the cost of debt. These results indicate that creditors generally view tax avoidance as positive and that tax avoidance is not regarded as inherently risky. Although tax avoidance is rewarded by capital markets with lower interest rates, tax risk contributes to higher interest rates. The effect of tax avoidance on the cost of debt depends therefore on the level of tax risk.

This paper contributes to two distinct strands of research: literature investigating the driving factors behind the cost of debt and literature investigating the consequences of firms’ tax avoidance activities.

The purpose of this study is to examine the impact of managerial ability on corporate tax risk and long-term tax avoidance using the upper echelons theory.

This study uses a quantitative method with regression models, using a sample of listed firms on the Indonesia Stock Exchange from 2011 to 2018.

The regression results report that managerial ability negatively influences tax risk and positively impacts long-run tax avoidance. Companies with more able managers have a relatively lower tax risk and greater long-run tax avoidance. The results reveal that firms with managers that possess greater abilities are more committed to long-run tax avoidance while concurrently maintaining a lower level of their tax risk. The impacts the authors report are statistically significant and robust, as proved by a series of robustness checks and additional tests.

This study only includes firms from one developing country.

The empirical results might be of interest to board members while envisaging the benefits and costs of appointing and hiring managers, as well as to the tax authority and the other stakeholders interested in apprehending how managerial ability influences corporate tax risk and long-run tax avoidance practices simultaneously.

This study proposes and tests an explanation for the impact of managerial ability on corporate tax risk and long-run avoidance simultaneously in the context of an emerging country.

This study aims to investigate the association between corporate tax avoidance and environmental costs and disclosure in Indonesia and Australia for the research period 2015–2019. This study also analyzes corporate strategies for overcoming public concerns about tax avoidance activities, namely, the trade-off legitimacy and risk reduction strategies, through two mechanisms: the mediation and moderation roles of environmental disclosure on the relationship between environmental costs and tax avoidance activities.

The data consists of 675 and 235 observations for Australia and Indonesia, respectively, which were analyzed quantitatively using panel regression.

The results showed that the trade-off legitimacy or risk reduction strategies are not found to be implemented by companies in Indonesia, while in Australia, corporations use the trade-off legitimacy strategy to reduce risk and overcome the negative impact of tax avoidance activities. The results also provide empirical evidence on the impact of environmental costs on environmental disclosure in both countries.

This study contributes to the literature by providing the latest evidence on the role of environmental costs on environmental disclosure, which has rarely been investigated in previous studies.

This study aims to examine the impact of founder or descendant chief executive officers (CEOs) on the relationship between tax avoidance and firms' future risk. This issue is important because of an ongoing debate about founder and descendant CEOs' impacts, contributions and implications for firms.

This study uses a sample of publicly listed nonfinancial Indonesian firms in 2012–2019, most of which are family firms and adhere to a two-tier governance system that was understudied in previous studies. The authors use panel-random effect data regression for the statistical analysis.

The results demonstrate that founder or descendant CEOs do not affect the positive relationship between tax avoidance and firms' future risks.

This research supports the upper-echelon theory, arguing that top management teams affect firms' strategic policies and outcomes.

CEOs play weaker roles in countries with a two-tier governance system than in a one-tier one. Additionally, in relation to Hofstede's cultural dimensions, Indonesia has collective and feminist characteristics that emphasize elements of togetherness and group so that firms reflect the firms' top management teams and not only CEOs.

This research fills a research gap on the role of founder and descendant CEOs in the relationship between tax avoidance and firms' future risks by analyzing firms in Indonesia, a country with a two-tier governance system and collective and feminine cultural characteristics.

The purpose of this study is to understand why individuals choose to avoid using e-services due to security concerns and perceived risk when these factors are affected by the perceived degree of government cybersecurity preparedness against cyberattacks.

The authors adopt the information systems success model to predict the role of government security preparedness efforts in influencing the determinants of e-services avoidance. The conceptual model includes four variables: security concerns, perceived risk of cyberattacks, perceived government cybersecurity preparedness and e-services avoidance. Data from 774 participants were used to analyze our conceptual model.

First, the findings show that security concerns regarding personal information safety and perceived risk of cyberattacks are barriers to e-services use, with the former having a stronger effect. Second, the findings showed that perceived government cybersecurity preparedness significantly reduces security concerns and perceived risk of cyberattacks. Third, the post hoc group analysis between individuals with a bachelor’s degree or higher versus those without a bachelor’s degree showed that the effect of both security concerns and perceived risk of cyberattacks on e-services avoidance was greater for individuals without a bachelor’s degree. The same relationship between perceived risk of cyberattacks and e-services avoidance was not supported for individuals with a bachelor’s degree or higher.

Extant privacy research fails to adequately examine the role of institutional factors, such as government efforts, and how these mitigate or amplify cybersecurity concerns and risks related to e-services. This research takes the first step toward addressing this limitation by examining the influence of government cybersecurity preparedness efforts on the determinants of e-services avoidance.

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.

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.

This study aims to examine how the effect of corporate tax avoidance on the cost of debt has changed in the period 1993–2017. Although it is known that tax avoidance has significantly increased during this period (Dyreng et al., 2017), little evidence exists on how this change alters the effect of tax avoidance on the cost of debt. This study investigates how changes in tax avoidance modify the association between tax avoidance and the cost of debt.

By using a comprehensive sample of 15,825 loan facilities issued to US public firms in the period 1993–2017, this study tests the time-series changes in the association between tax avoidance and the cost of debt.

This study finds that a positive association between tax avoidance and the cost of debt has been declined over the past 25 years. Accordingly, tax avoidance in general no longer increases the loan spread after the enactment of domestic production activities deduction. However, the risker end of tax avoidance does still increase the loan spread.

This study spotlights the time-series changes in the effect of corporate tax avoidance on the cost of debt, showing how lenders perception on corporate tax avoidance has altered in accordance with changes in corporate tax practice.