The Impact of Avoiding Tax on Accounting and Economic Firm Performance Criteria: Evidence from Tehran Stock Exchange

Document Type : Research Paper

Authors

1 PhD in Finance and accounting, Faculty of Economics and Administrative Sciences, University of Selcuk, Konya, Turkey

2 PhD student in Finance, Faculty of Management, University of Istanbul, Istanbul, Turkey

Abstract

Tax avoidance is one of the most important managers’ decision which can have a positive or adverse effect on a company's performance by preventing the transfer of the firm's resources to the government. The purpose of this study is to investigate the effect of tax avoidance on accounting and economic performance criteria of listed companies in Tehran Stock Exchange with a sample size of 180 companies for the years 2009-2018. To test the hypotheses, multivariate linear regression got used, and to measure the performance of the firm, one accounting criterion free cash flow, and two economic criteria of economic value-added and market value-added have been used. The effective operating cash flow tax rates have also been used to measure avoiding tax. The research findings showed that there is a negative and significant relationship between tax avoidance with accounting and economic performance criteria of the firm, which means that with increasing tax avoidance, the company's performance has been decreased. Therefore, it can be concluded that choosing a tax avoidance strategy as a way to prevent the outflow of resources, has an unfavorable impact on company performance, which can be due to the undesirable use of the resulting resources.

Keywords

References

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History

  • Receive Date: 16 December 2019
  • Revise Date: 26 January 2021
  • Accept Date: 06 September 2020

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