Financial distress and tax avoidance: the moderating effect of the COVID-19 pandemic
Purpose – This paper examines whether financial distress is associated with tax avoidance and whether the COVID-19 pandemic moderates such association. Design/methodology/approach – The sample covers 38,958 firm-year observations from 32 countries during the period 2015–2020. Financial distress is m...
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| Format: | Article |
| Language: | English |
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Emerald Publishing
2023-06-01
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| Series: | AJAR (Asian Journal of Accounting Research) |
| Subjects: | |
| Online Access: | https://www.emerald.com/insight/content/doi/10.1108/AJAR-10-2022-0347/full/pdf |
| _version_ | 1797792249325551616 |
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| author | Akmalia Ariff Wan Adibah Wan Ismail Khairul Anuar Kamarudin Mohd Taufik Mohd Suffian |
| author_facet | Akmalia Ariff Wan Adibah Wan Ismail Khairul Anuar Kamarudin Mohd Taufik Mohd Suffian |
| author_sort | Akmalia Ariff |
| collection | DOAJ |
| description | Purpose – This paper examines whether financial distress is associated with tax avoidance and whether the COVID-19 pandemic moderates such association. Design/methodology/approach – The sample covers 38,958 firm-year observations from 32 countries during the period 2015–2020. Financial distress is measured using the ZSCORE by Altman (1968), while tax avoidance is based on the book-tax difference. Findings – Financially distressed firms exhibit low tax avoidance pre- and during the pandemic periods. The authors find higher tax avoidance during the pandemic compared to the pre-pandemic period, but the pandemic enhances the negative relationship between financial distress and tax avoidance. Research limitations/implications – The study offers evidence on how financial distress drives firms to engage in more tax avoidance when firms globally encountered various levels of financial difficulty sparked by the economic challenges of the COVID-19 pandemic. Practical implications – The findings provide insights to policymakers on the need to monitor and incentivise financially distressed firms, especially during economic challenges due to pandemic. Originality/value – This study adds to the limited, albeit important, evidence on the joint effect of the COVID-19 pandemic and financial distress on tax avoidance. |
| first_indexed | 2024-03-13T02:30:29Z |
| format | Article |
| id | doaj.art-c16a70cb0b0a4f6abf0889a0f225c919 |
| institution | Directory Open Access Journal |
| issn | 2459-9700 2443-4175 |
| language | English |
| last_indexed | 2024-03-13T02:30:29Z |
| publishDate | 2023-06-01 |
| publisher | Emerald Publishing |
| record_format | Article |
| series | AJAR (Asian Journal of Accounting Research) |
| spelling | doaj.art-c16a70cb0b0a4f6abf0889a0f225c9192023-06-29T19:28:44ZengEmerald PublishingAJAR (Asian Journal of Accounting Research)2459-97002443-41752023-06-018327929210.1108/AJAR-10-2022-0347Financial distress and tax avoidance: the moderating effect of the COVID-19 pandemicAkmalia Ariff0Wan Adibah Wan Ismail1Khairul Anuar Kamarudin2Mohd Taufik Mohd Suffian3Universiti Malaysia Terengganu, Kuala Nerus, MalaysiaUniversiti Teknologi MARA, Merbok, MalaysiaUniversity of Wollongong in Dubai, Dubai, United Arab EmiratesUniversiti Teknologi MARA, Tapah, MalaysiaPurpose – This paper examines whether financial distress is associated with tax avoidance and whether the COVID-19 pandemic moderates such association. Design/methodology/approach – The sample covers 38,958 firm-year observations from 32 countries during the period 2015–2020. Financial distress is measured using the ZSCORE by Altman (1968), while tax avoidance is based on the book-tax difference. Findings – Financially distressed firms exhibit low tax avoidance pre- and during the pandemic periods. The authors find higher tax avoidance during the pandemic compared to the pre-pandemic period, but the pandemic enhances the negative relationship between financial distress and tax avoidance. Research limitations/implications – The study offers evidence on how financial distress drives firms to engage in more tax avoidance when firms globally encountered various levels of financial difficulty sparked by the economic challenges of the COVID-19 pandemic. Practical implications – The findings provide insights to policymakers on the need to monitor and incentivise financially distressed firms, especially during economic challenges due to pandemic. Originality/value – This study adds to the limited, albeit important, evidence on the joint effect of the COVID-19 pandemic and financial distress on tax avoidance.https://www.emerald.com/insight/content/doi/10.1108/AJAR-10-2022-0347/full/pdfCOVID-19Financial distressCorporate tax avoidanceCross-country |
| spellingShingle | Akmalia Ariff Wan Adibah Wan Ismail Khairul Anuar Kamarudin Mohd Taufik Mohd Suffian Financial distress and tax avoidance: the moderating effect of the COVID-19 pandemic AJAR (Asian Journal of Accounting Research) COVID-19 Financial distress Corporate tax avoidance Cross-country |
| title | Financial distress and tax avoidance: the moderating effect of the COVID-19 pandemic |
| title_full | Financial distress and tax avoidance: the moderating effect of the COVID-19 pandemic |
| title_fullStr | Financial distress and tax avoidance: the moderating effect of the COVID-19 pandemic |
| title_full_unstemmed | Financial distress and tax avoidance: the moderating effect of the COVID-19 pandemic |
| title_short | Financial distress and tax avoidance: the moderating effect of the COVID-19 pandemic |
| title_sort | financial distress and tax avoidance the moderating effect of the covid 19 pandemic |
| topic | COVID-19 Financial distress Corporate tax avoidance Cross-country |
| url | https://www.emerald.com/insight/content/doi/10.1108/AJAR-10-2022-0347/full/pdf |
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