Corporate tax avoidance, economic policy uncertainty, and the value of excess cash: International evidence

Benkraiem, Ramzi; Gaaya, Safa; Lakhal, Faten

doi:10.1016/j.econmod.2021.105738

Cited by 24 publications

(23 citation statements)

References 44 publications

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“…Some scholars have found that the cash flows generated from tax avoidance activities does not necessarily increase the firm value. Instead, it can subsequently be used for overinvestment (Asiri et al, 2020; Benkraiem et al, 2021; Kovermann & Wendt, 2019). Cash, as the most vulnerable asset of a firm, is most susceptible to capture, appropriation and manipulation by self‐serving managers in the presence of information asymmetry, such as pursuing on‐the‐job spending, expanding their firms beyond optimal size to gain more power for themselves, and resulting in suboptimal overinvestment (Asiri et al, 2020; Benkraiem et al, 2021; Harford et al, 2008).…”

Section: Literature Backgroundmentioning

confidence: 99%

“…Managerial myopia refers to a behavior in which managers make short‐term behaviors to satisfy short‐term financial performance maximization at the expense of the firm's long‐term development (Edmans, 2009; Ridge et al, 2014). We know that the cash flows generated by tax avoidance activities can be used for both long‐term R&D and short‐term financialized investments, while investment duration selection of firms is determined by managers' decision horizon (Benkraiem et al, 2021; Holden & Lundstrum, 2009; Li et al, 2019; Li et al, 2021). To obtain a higher valuation in the manager market, increase compensation, and build good reputation, myopic managers prefer to take certain actions to apply the tax sheltered cash flows into short‐term projects (Holden & Lundstrum, 2009; Li et al, 2021), such as tradable financial assets.…”

Section: Theoretical Analysis and Research Hypothesismentioning

confidence: 99%

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Corporate tax avoidance and corporate financialization: The moderating effect of managerial myopia

et al. 2022

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The purpose of this paper is to investigate whether managers with tax avoidance motivation also engage in corporate financialization. Using a large sample of Chinese A-share non-financial listed firms from 2009 to 2020, the empirical results show that there is a positive association between corporate tax avoidance and corporate financialization. Moreover, the positive effect of tax avoidance on corporate financialization mainly manifests in firms with myopic managers. Our results are robust to alternative measures of both tax avoidance and managerial myopia. Two-stage least squares (2SLS) regression and propensity score matching (PSM) confirm our results and mitigate any potential endogeneity issues. Overall, we show that the agency costs between shareholders and managers indeed play a critical role between tax avoidance and corporate financialization.

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Section: Literature Backgroundmentioning

confidence: 99%

Section: Theoretical Analysis and Research Hypothesismentioning

confidence: 99%

Corporate tax avoidance and corporate financialization: The moderating effect of managerial myopia

et al. 2022

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“…In addition to the cases above, there are many more cases that demonstrate corporate tax avoidance and have caused many losses to the state which have an impact on the country's economic growth because of their efforts to reduce tax costs which are a source of income for the state (Benkraiem et al, 2022;Hajawiyah et al, 2021;Hasan et al, 2022). In addition to the Gap Phenomenon, this study also found a research gap on the effect of tunneling incentives on tax avoidance.…”

Section: Introductionmentioning

confidence: 66%

“…This can be seen in the growth of tax revenue in 2019 of 1,545.3 Trillion Rupiah's, compared to nontax state revenue in the same year, which was only 405 Trillion Rupiah (Damayanti & Wulandari, 2021). There are cases in Indonesia regarding tax avoidance involving corporate taxpayers with the aim of minimizing the tax burden that must be paid through various means (Benkraiem et al, 2022;Hajawiyah et al, 2021). In this study, there is a gap phenomenon in the tax avoidance variable.…”

Section: Introductionmentioning

confidence: 90%

“…Tang et al, 2022). Payment of income tax to companies is the transfer or transfer of wealth from the company to the government, the tax burden paid is a large cost for the company, therefore the companies will tend to avoid taxes in an effort to be able to pay as efficiently as possible (Benkraiem et al, 2022;Campa et al, 2021;Shams et al, 2022). Taxpayers always want small tax payments, which is why not a few taxpayers do tax avoidance both legally and illegally (Han et al, 2021;Sugiyanto et al, 2020).…”

Section: Introductionmentioning

confidence: 99%

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Influence of Tunneling Incentive, Risk Management and Company Characteristics on Tax Avoidance with Corporate Social Responsibility Disclosure Asa Moderating Variable In Mining Companies Listed on IDX

Suripto

Novitaria

2021

IJSSB

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In Indonesia, there are tax evasion cases involving taxpayers paying taxes that must be paid in various ways. This gap phenomenon occurs in the case of a coal mining company that has been proven to have evaded tax. In addition, there are many more cases that show corporate tax evasion and have caused many state losses that impact the country's economic growth because of their efforts to reduce costs which are a source of income for the state. This study aims to provide empirical evidence of the effect of applying tunneling incentives, risk management, and firm characteristics using the leverage ratio and firm size, as independent variables, on tax avoidance as the dependent variable, with the use of Corporate Social Responsibility (CSR) as the independent variable. Variable moderator. Determination of the sample using the purposive sampling technique obtained a sample of 8 companies with 40 observational data. The analysis technique and hypothesis testing were carried out by panel data regression analysis through Eviews-11. The results showed that tunneling incentive and firm size had a significant positive effect on tax avoidance. Risk management and leverage do not affect tax avoidance. Corporate social responsibility can only moderate the effect of tunneling incentives on tax avoidance and firm size on tax avoidance but cannot moderate the effect of risk management and leverage.

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Does climate risk vulnerability affect the value of excess cash? International evidence

Guizani,

Nizar,

Lakhal

et al. 2024

Int. J Fin Econ

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In this paper, we investigate the impact of climate risk on the value of excess cash. Based on an international sample of 6468 firm‐year observations from 2010 to 2019, the results show that climate risk vulnerability positively affects the value of excess cash. This suggests that investors may consider firms with excess cash to be better positioned to challenge extreme weather events by using cash reserves to cover up expenses and maintain operations. This positive effect is more pronounced for firms operating in countries with strong investor protection, for those with strong governance quality, and for those with high corporate social responsibility performance. However, it is less accentuated in the presence of financial constraints. Overall, our findings have significant practical implications for decision‐makers, investors, and policymakers.

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Corporate tax avoidance, economic policy uncertainty, and the value of excess cash: International evidence

Cited by 24 publications

References 44 publications

Corporate tax avoidance and corporate financialization: The moderating effect of managerial myopia

Corporate tax avoidance and corporate financialization: The moderating effect of managerial myopia

Influence of Tunneling Incentive, Risk Management and Company Characteristics on Tax Avoidance with Corporate Social Responsibility Disclosure Asa Moderating Variable In Mining Companies Listed on IDX

Does climate risk vulnerability affect the value of excess cash? International evidence

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