The Impact of Audit Characteristics on Corporate Tax Avoidance: The Moderating Role of Gender Diversity

Riguen, Rakia; Salhi, Bassem; Jarboui, Anis

doi:10.47743/saeb-2021-0002

Cited by 16 publications

(19 citation statements)

References 59 publications

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“…Lestari and Nedya (2019) extend the findings of Hanlon (2005) by showing that audit quality measured by audit fees has a negative effect on corporate tax avoidance, meaning the higher the auditor quality is, the lower of the audit client’s tax avoidance will be. These findings further support the idea of Riguen et al (2020) who find that higher fees paid by clients to their external auditors are associated with lower future marginal and ETRs. Also, Lestari and Nedya (2019) show that audit quality by audit size and/or audit fee has a negative effect on tax avoidance.…”

Section: Literature Review and Hypothesis Developmentsupporting

confidence: 86%

Corporate social responsibility and tax avoidance: the case of French companies

Abid

Dammak²

2021

JFRA

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Purpose The purpose of this paper is to shed light on the effect of tax avoidance on corporate social responsibility performance. It also investigates whether audit quality affects tax avoidance practices by socially responsible performance. Design/methodology/approach Based on a sample of French non-financial companies over the period 2005 to 2016, this paper uses panel data regressions. The authors apply generalized least square panel regression to overcome autocorrelation and heteroscedasticity problems. For further robustness, this paper runs instrumental variable regressions using the three-stage instrument variable method (three-stage least square). Findings The results show that firms with high CSR scores are more likely to engage in aggressive tax avoidance. The findings also show that firms audited by high-quality auditors are more likely to get involved in CSR for hedging against the potential consequences of aggressive tax avoidance practices. Research limitations/implications The findings are consistent with risk management theory, which suggests that firm’s hedge against any reputational risks that might arise from avoiding taxes by engaging more in CSR. Practical implications Results have implications for policymakers in that CSR firms audited by high-quality auditors may engage in CSR to overcome any negative reactions that could be caused as a result of tax avoidance. Thus, they need to be cautious about managers’ opportunistic behavior and enhance monitoring to enforce social compliance and to be tax compliant. Originality/value This paper extends the existing literature by examining the effect of audit quality on the relationship between CSR performance and corporate tax avoidance. Audit quality is deemed to be an important governance feature that is likely to constraint managerial opportunistic behaviors. Audit quality, along with CSR performance, are associated with a higher level of tax avoidance.

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Section: Literature Review and Hypothesis Developmentsupporting

confidence: 86%

Corporate social responsibility and tax avoidance: the case of French companies

Abid

Dammak²

2021

JFRA

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“…Therefore, we added size (SIZE) as a control variable in our analysis. Firm size is measured by taking the natural log of total assets; one of the most frequently used measures for firm size (Jarboui et al , 2020; Mouakhar et al , 2020; Riguen et al , 2021). Leverage (LEV).…”

Section: Methodsmentioning

confidence: 99%

“…A number of researchers have investigated the relationship between board structure and corporate tax avoidance (Barros and Sarmento, 2020; Lanis et al , 2019; Abd-Elmageed et al , 2020). Yet, few studies investigated how the presence of female directors affects the level of tax avoidance (Hoseini et al , 2019; Riguen et al , 2021). Hence, it is worthy to study what prior researchers relatively neglected and gain new insights into the relationship between board gender diversity (BGD) and tax avoidance.…”

Section: Introductionmentioning

confidence: 99%

“…Third, the current research focused on French companies. A huge stream of research has investigated relationships between corporate governance and CSR (Bouzouitina et al , 2021; Kachouri et al , 2020; Salhi et al , 2019; Jarboui et al , 2020) and between corporate governance and tax avoidance (Riguen et al , 2020; Riguen et al , 2021; Salhi et al , 2020; Wahab and Holland, 2012) in UK context. Although, very few studies have examined associations between those concepts in the French context.…”

Section: Introductionmentioning

confidence: 99%

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Do women on corporate boardrooms have an impact on tax avoidance? The mediating role of corporate social responsibility

Dakhli

2021

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Purpose The purpose of this paper is to investigate the direct and indirect relationship between board gender diversity and corporate tax avoidance using corporate social responsibility (CSR) as a mediating variable. Design/methodology/approach This study uses a panel dataset of 200 French firms listed during 2007–2018 period. The direct and indirect effects between board gender diversity (BGD) and tax avoidance were tested by using structural equation model analysis. Findings The results indicate that the presence of women on corporate boardrooms negatively affects tax avoidance. The greater the proportion of women in boards, the lower the likelihood of tax avoidance practice. In the mediation test, CSR appears to partially mediate the link between women on boards and corporate tax avoidance. Additional analysis shows that the social dimension of CSR produces this mediating effect. Practical implications The results have practical implications for companies in regulating the composition of their boards. To benefit from diversity, firms have to increase women‘s percentage in their boards of directors. Also, investors are encouraged to pay attention to the percentage of female directors when investing and purchasing shares. Social implications This study proved empirically that the higher proportion of female directors significantly reduces the possibility of tax avoidance either directly or indirectly through enhancing CSR performance. The findings show that firms with gender diversified boards are more likely to get involved in CSR for hedging against the potential consequences of aggressive tax avoidance practices. In light of the above results, firms are well-advised to strongly apply the policy encouraging or mandating women as board members to take advantage of their expected benefits. Originality/value The originality of this paper consists in proposing the establishment of both direct and indirect relationships between BGD and corporate tax avoidance through CSR. Unlike prior studies that have been examining the direct relationship between corporate governance mechanisms and corporate tax avoidance, this study went further to investigate the indirect relationship between these two constructs. This study also differs from prior studies as it examines the effect of BGD on each of constituting pillars of CSR, namely, environmental, social and governance. To date, an extensive part of CSR research has used the combined score of CSR, but the effects on different CSR pillars remain little investigated.

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“…Prior studies have examined companies’ characteristics as determining factors in decision-making to undertake tax avoidance, namely, firm size (Prabowo, 2020; Jarboui et al , 2020; Mouakhar et al , 2020; Riguen et al , 2021), liquidity level (Sari and Tjen, 2017; Dharma and Ardiana, 2016; Kalbuana et al , 2020; Swingly and Sukharta, 2015), profitability level (Mafrolla and D’Amico, 2016; Salhi et al , 2019; Rahman and Leqi, 2021) and ownership structure (Fernández-Rodríguez et al , 2019; Zolotoy et al , 2021; Khan et al , 2017; Jiang et al , 2021; Ying et al , 2017; Bird and Karolyi, 2017; Widyastuti, 2018). In this regard, ownership structure plays an important role in firms’ decisions on tax avoidance (Kovermann and Velte, 2019).…”

Section: Introductionmentioning

confidence: 99%

The impact of ownership structure on corporate tax avoidance with corporate social responsibility as mediating variable

Dakhli

2021

JFC

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Purpose The purpose of this paper is to investigate the direct and indirect relationship between institutional ownership and corporate tax avoidance using corporate social responsibility (CSR) as a mediating variable. Design/methodology/approach This study uses panel data set of 200 French firms listed during the 2007–2018 period. The direct and indirect effects between managerial ownership and tax avoidance were tested by using structural equation model analysis. Findings The results indicate that institutional ownership negatively affects tax avoidance. The greater the proportion of the institutional ownership, the lower the likelihood of tax avoidance usage. From the result of the Sobel test, this study indicated that CSR partially mediates the effect of institutional ownership on corporate tax avoidance. Practical implications The findings have some policy and practical implications that may help regulators in improving the quality of transactions and in achieving more efficient market supervision. They recommend to the government to add regulations and restrictions to the structure of corporate ownership to control corporate tax avoidance in French companies. Originality/value This study extends the existing literature by examining both the direct and indirect effect of institutional ownership on corporate tax avoidance in French companies by including CSR as a mediating variable.

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The Impact of Audit Characteristics on Corporate Tax Avoidance: The Moderating Role of Gender Diversity

Cited by 16 publications

References 59 publications

Corporate social responsibility and tax avoidance: the case of French companies

Corporate social responsibility and tax avoidance: the case of French companies

Do women on corporate boardrooms have an impact on tax avoidance? The mediating role of corporate social responsibility

The impact of ownership structure on corporate tax avoidance with corporate social responsibility as mediating variable

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