An investigation of the Interaction Relationship between Tax Avoidance and Stock Returns Using the Simultaneous Equation Method (3SLS)

Document Type : Research Paper

Authors

1 accounting Master of the university of mazandaran

2 Master of Accounting at Razi University

Abstract

Tax Avoidance Management solutions to reduce taxes paid are called tax avoidance. This variable can lead to obscure information space and consequently accumulate bad news and information appearance and thus increase company stock returns.  In turn stock returns lead to Non-disclosure of information by management due to the pleasant stability of returns and as a result provide space for opportunistic tax avoidance behaviors. Based on this, the explanation of the interrelationships between these behaviors and how these two assessments are related is important. In this study, the relationship between tax avoidance and stock returns has been investigated. For this purpose, sample included 104 companies during 2014 to 2018 was selected and was examined using the Simultaneous Equation (3SLS). In this study, the difference between accounting profit and taxable profit is used to measure tax avoidance, adjusted annual return was used to measure stock returns. Findings show that there is a positive relationship between tax avoidance and stock return. These findings can be useful for tax policy makers as well as business managers in explaining the relationship between tax avoidance and stock returns.

Keywords

References

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History

  • Receive Date: 01 December 2019
  • Revise Date: 23 June 2020
  • Accept Date: 04 April 2020

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