The relationship between tax avoidance and firm value with income smoothing

Akbari, Farzana; Salehi, Mahdi; Vlashani, Mohammad Ali Bagherpour

doi:10.1108/ijoa-09-2017-1235

Cited by 30 publications

(19 citation statements)

References 35 publications

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“…Third, assuming normality, the inclusion of the Bayesian approach shows that the results (untabulated) are consistent to those reported in Table 3. Similar to Akbari et al (2019), we implemented a multilevel Bayesian test using a Metropolis–Hastings sampling method. Specifically, the first level contains the study's variables, while the second and the third levels contain the industry and year groupings, accordingly.…”

Section: Notesmentioning

confidence: 99%

The impact of business strategy on corporate cash policy

Magerakis

Tzelepis

2020

JAAR

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PurposeThe purpose of this study is to explore the association between cash holdings and business strategy for nonfinancial and nonutility US firms over the period from 1970 to 2016.Design/methodology/approachThe authors have used Miles and Snow's (1978, 2003) theoretical background and followed Bentley et al. (2013) to construct a strategy index. Thus, the authors have distinguished two extreme corporate strategies, prospectors and defenders, based on a firm's resource allocation and investment behavior patterns. Following the methodology of Bates et al. (2009), the authors have used the multiple regression analysis to explore the relationship between business strategy and corporate cash holdings.FindingsThe empirical results show that business strategy is positively related to cash holdings. Prospectors are more likely to hold higher cash levels than defenders. Furthermore, the authors have found that cash holding's speed of adjustment (SOA) is slower for prospectors than for defenders, suggesting that business strategy influences cash holding's trend. Interestingly, the results show that the market value of cash increases significantly only for the firms that pursue a defender strategy.Research limitations/implicationsThe results of this work have valuable implications for researchers, by unveiling the relationship between corporate strategy and firm's cash holdings. This study, however, is limited to a sample of US firms; empirical evidence based on international samples of firms would add value to the current literature.Practical implicationsThe findings could be useful to financial managers and investment strategists, who seek to maximize firm value through the adoption of an effective liquidity policy. What is more, this study provides support for the view that strategic choice and optimal cash management are of great importance for firms' market value.Originality/valueThis study enriches the knowledge of business strategy's impact on financing policy of firms and contributes to the empirical literature of cash holdings' determinants. In addition, it complements previous studies on US firms by documenting the effect of business strategy on the SOA in cash holdings and firm value.

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Section: Notesmentioning

confidence: 99%

The impact of business strategy on corporate cash policy

Magerakis

Tzelepis

2020

JAAR

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“…The results are consistent with the agency cost theory that tax avoidance is considered to be complex, this causes managers to cover up their actions in exploiting wealth from tax saving activities. (Akbari et al, 2019) and (Yee et al, 2018) The Sustainability Report Disclosure is unable to affect firm value, means H2 not supported. Companies that publish the Sustainability Report do not guarantee that their company performance will improve, and this may be due to investors being more interested in buying legitimate companies that generate the expected profit and do not care about the disclosure of the Sustainability Report.…”

Section: Discussionmentioning

confidence: 97%

The effect of tax avoidance, sustainbility report, corporate governance on firm value: Leverage as moderating (Empirical Study On Registered Manufacturing Companies On the Indonesia Stock Exchange 2014-2019)

Andayani

Yanti

2021

TSSJ

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Disclosure about the factors that influence firm value is the aim of this study. Tax avoidance variables, sustainability reports, corporate governance practices and leverage are thought to influence firm value. Samples were selected based on certain criteria. Therefore, data obtained from the Indonesia Stock Exchange as many as forty companies for six years (2014 to 2019). The results reveal that tax avoidance, sustainability reporting, corporate governance practices affects firm value in a negative direction. Meanwhile, leverage affects firm value in a positive direction. The effect of the sustainability report on firm value is proven not to be strengthened by the leverage variable as a moderating variable, but it does strengthen the effect of tax avoidance and corporate governance on firm value.. Originality / Value - This paper contributes to three different series of studies: the literature on government as a determinant of tax avoidance in Indonesia. For companies, evaluate, improve, improve performance. For investors, to assist in making wise judgments about the value of the firm, it is worth considering other factors and for the academy as the theoretical library used. For further research with institutional ownership variable, financial crisis as a moderating variable.

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“…In extension to the argument, tax avoidance has a negative direct impact on a firm's value, however, with the moderation of profitability and growth performance, the impact becomes positive which shows that tax avoidance can be continued but it need effective legal control and governance (Zhang et al , 2017). Similarly, the role of managers significantly influences the relationship between tax avoidance and firms' value (Akbari et al , 2019).…”

Section: Literature Review and Hypothesismentioning

confidence: 99%

Tax avoidance as earning game player in emerging economies: evidence from Pakistan

Marwat

Rajput

Dakhan

et al. 2021

SAJBS

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PurposeThe current study aims to achieve two targets. First, examine empirically that whether corporate managers use tax avoidance to influence short-term profitability? Second, investigate the impact of tax avoidance on the value of firms. The tax accounts provide the opportunity to influence temporary/permanent profitability but empirical studies overlooking this matter, particularly in emerging economies.Design/methodology/approachFirst, the authors identified unexpected fluctuations of tax avoidance and then examine whether it impacts the profitability signal and firms' value? The unbalanced panel data of 189 non-financial firms for the period 2000–2018 are used for empirical analysis. The estimation biases and results consistency are verified by using two different econometric models including generalized least square and two-stage least squareFindingsThe study identifies that managers manipulate the profitability signal through tax avoidance. Tax avoidance practices help in earning management and earning smoothing to avoid negative signals in the stock market. In line with the behavioral finance view, tax avoidance has a positive impact on current stock returns because investors focus on profitability without a detailed screening of cash flows.Originality/valueA limited number of studies investigate the use of tax avoidance for manipulation of the short-term earning signal. Identifying gaps and limitations in the literature, this study provides invaluable insights into tax avoidance and its association with the profitability and value of firms. The findings are important for investors, managers and policymakers in making portfolio decisions and corporate policies.

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The relationship between tax avoidance and firm value with income smoothing

Cited by 30 publications

References 35 publications

The impact of business strategy on corporate cash policy

The impact of business strategy on corporate cash policy

The effect of tax avoidance, sustainbility report, corporate governance on firm value: Leverage as moderating (Empirical Study On Registered Manufacturing Companies On the Indonesia Stock Exchange 2014-2019)

Tax avoidance as earning game player in emerging economies: evidence from Pakistan

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