• Register
  • Login
  • Persian

Financial Accounting Knowledge

  1. Home
  2. The effects of labor investment inefficiency on corporate tax avoidance activities

Current Issue

By Issue

By Author

By Subject

Author Index

Keyword Index

About Journal

Aims and Scope

Editorial Board

Publication Ethics

Indexing and Abstracting

Related Links

FAQ

Peer Review Process

Journal Metrics

News

Guide for Authors

Terms and Conditions

Forms

The effects of labor investment inefficiency on corporate tax avoidance activities

    Authors

    • GholamReza Rezaei 1
    • Reza Taghizadeh 2
    • Mohammad Sadeghzadeh Maharlui 3
    • Ramin Zeraatgari 1

    1 Assistant Professor of Accounting, University of Sistan and Baluchestan, Zahedan, Iran

    2 Assistant Professor of Accounting, Yazd University, Yazd, Iran

    3 Assistant Professor of Accounting, Shiraz University, Shiraz, Iran

,

Document Type : Research Paper

10.30479/jfak.2021.15873.2888
  • Article Information
  • References
  • Download
  • How to cite
  • Statistics
  • Share

Abstract

Purpose: Considering the role of taxation in the administration of each country, this study was conducted to study the effects of labor investment inefficiency on corporate tax avoidance activities.
Method: The research methodology is a quantitative and ex-post. For doing statistical analysis, the linear regression analysis was used by using the panel data method. Data related to 124 companies listed on the Tehran Stock Exchange during the period 2009-2020.
Results: The research results showed that inefficiency of investment in labor has positive effects on tax avoidance and can play an important role in corporate tax decisions. Also, there is a positive (negative) relationship between overinvesting (underinvesting) in labor and tax avoidance. In addition, the evidence showed that when companies have limitation in funding, there is no difference in the intensity of this positive relationship.
Conclusion: Increase in ambiguity, weaker control environment and reduction in expected cash flows due to inefficiency of investment in the workforce provide opportunities and context for the company's management to increase tax avoidance, thus, those involved in the field of taxation should pay special attention to this issue.
Contribution: Rendering evidence about the effects of labor inefficiency investment on tax avoidance considering the role of constraints in financing can be introduced as knowledge Enrichment in this study.

Keywords

  • Labor
  • Employment
  • Over-Investment in Labor
  • Under-Investment in Labor
  • Effective Tax Rate

Main Subjects

  • Financial Accounting
  • XML
  • PDF 1.29 M
  • RIS
  • EndNote
  • Mendeley
  • BibTeX
  • APA
  • MLA
  • HARVARD
  • CHICAGO
  • VANCOUVER
References
Almeda H, Campello M, Weisbach M. S. (2004). The cash flow sensitivity of cash, The Journal of Finance, 59(4): 1777–1804.
Amihud, Y., Mendelson, H., (1986). Asset pricing and the bid-ask spread. J. Financ. Econ. 17, 223–249.
Baker, M., Greenwood, R., Wurgler, J., (2003). The maturity of debt issues and predictable variation in bond returns. Journal of Financial Economics. 70: 261–291.
Balakrishnan, K., Blouin, J.L., Guay, W.R., (2012). Does Tax Aggressiveness Reduce Corporate Transparency? Available at: SSRN: https://ssrn.com/abstract¼1792783.
Ben-Nasr, H., & Alshwer, A. A. (2016). Does stock price informativeness affect labor investment efficiency? Journal of Corporate Finance, 38(C), 249-271.
Bentolila, S., Saint-Paul, Gilles, (2003). Explaining movement in the labor share. Contrib. Macroecon. 3 (1): 1–31.
Bertrand, M., Mullainathan, S., (2004). Are Emily and Greg more employable than Lakisha and Jamal? A field experiment on labor market discrimination. Am. Econ. Rev. 94: 991–1013.
Biddle, G. C., & Hilary, G. (2006). Accounting quality and firm-level capital investment. The Accounting Review, 81(5), 963-982.
Cameron, K.S., (1994). Strategies for successful organizational downsizing. Human Resource Management. 33 (2), 189–211.
Cameron, K.S., Freeman, S.J., Mishra, A.K., (1991). Best practices in white collar downsizing: managing Contradictions. Academy of Management Executive. 5, 57–73.
Chen, C. Lai, sh (2013). Financial Constraint and Tax Aggressiveness, Department of Accounting & Finance, The University of Auckland, NEW ZEALAND.
Chen, S., Chen, A., Cheng, Q., Shevlin, T., (2010). Are family firms more tax aggressive than nonfamily firms? Journal of Financial Economics. 95, 41–61.
Cheng, C.S., Huang, H., Li, Y., Stanfield, J., (2012). The effect of hedge fund activism on corporate tax avoidance. The Accounting Review. 87 (5), 1493–1526.
Chyz, James A., Winnie Siu Ching Leung, Oliver, Zhen Li, Oliver Meng, Rui, (2013). Labor unions and tax aggressiveness. Journal of Financial Economics. 108, 675–698.
Desai, M.A., Dharmapala, D., (2009). Corporate tax avoidance and firm value. The Review of Economics and Statistics. 91, 537–546.
Diamond, D.W., Verrecchia, R.E., (1991). Disclosure, liquidity, and the cost of capital. The Journal of Finance. 46, 1325–1359.
Dongmei L. (2009). Financial constraints, R&D investment, and stock returns: theory and evidence, Working paper; The Wharton School, University of Pennsylvania.
Dyreng, S., Hanlon, M., Maydew, E. (2010). The effects of executives on corporate tax avoidance. The Accounting Review. 85 (4), 1163–1189.
Easley, D., O’Hara, M., (2004). Information and the cost of capital. The Journal of Finance. 59, 1552–1583.
Edwards, A., Schwab, C. & Shevlin, T (2013). Financial Constraints and the Incentives for Tax Planning, 2013 American Taxation Association Midyear Meeting. Available at SSRN: http://ssrn.com/abstract=2216875.
Ghaly, M., Dang, V.A., & Stathopoulos, K. (2020). Institutional investors' horizons and corporate employment decisions. Journal of Corporate Finance, 64, 101-130.
Gupta, S., Newberry, K., (1997). Determinants of the variability in corporate effective tax rates: evidence from longitudinal data. Journal of Accounting and Public Policy. 16 (1), 1–34.
Hanlon, M., Heitzman, S., (2010). A review of tax research. Journal of Accounting and Economics. 50, 127–178.
Higgins, D., Omer, T., Phillips, J.D., (2014). The influence of a firm's business strategy on its tax aggressiveness. Contemporary Accounting Research. 32 (2), 674–702.
Jensen, M. (1986). Agency costs of free cash flow, corporate finance, and takeovers. The American Economic Review, 76, 323-329.
Jensen, M., (1993). The modern industrial revolution, exit, and the failure of internal control systems. The Journal of Finance 48, 831–880.
Jensen, M., Meckling, W., (1976). Theory of the firm: managerial behaviour, agency costs, and ownership structure. Journal of Financial Economics. 3 (4), 305–360.
Jung, B., Lee, W.J., & Weber, D.P. (2014). Financial reporting quality and labor investment efficiency. Contemporary Accounting Research, 31(4), 1047-1076.
Kaplan S. N, Zingales L. (1997). Do investment-cash flow sensitivities provide useful measures of financing constraints? The Quartely Journal of Economics; 112(1): 169-215.
Khajavi, Sh., Valipour, H., and Kavianifard, H. (2018). The investigating of the role of the board in tax avoidance firms listed in the Tehran Stock Exchange, Journal of Financial Accounting Knowledge, 5(2): 59–84. (In Persian)
Khedmati, M., Sualihu, M.A., & Yawson, A. (2020). CEO-director ties and labor investment efficiency. Journal of Corporate Finance, 65, 101-119.
Kim, K. A. and P. Limpaphayom (1998). Taxes and firm size in pacific-basin emerging economies. Journal of International Accounting, Auditing and Taxation, Vol. 7, No. 1, pp. 47-63.
Lambert, R., Leuz, C., Verrecchia, R.E., (2007). Accounting information, disclosure, and the cost of capital. Journal of Accounting Research. 45 (2), 385–420.
Li, F. (2011). Earnings quality based on corporate investment decisions. Journal of Accounting Research, 49(3), 721-752.
Mahdavi, Gh. and Rezaie, Gh. (2015). Examining the relationship between board structure and financing constraints for the companies listed on Tehran Stock Exchange, Financial Research Journal, 17(1): 179–198. (In Persian)
McGuire, S.T., Omer, T., Wang, D., (2012). Tax avoidance: does tax-specific industry expertise make a difference? The Accounting Review. 87 (3), 975–1003.
McNichols, M., Stubben, S., (2008). Does earnings management affect firms' investment decisions? The Accounting Review. 83 (6), 1571–1603.
Myers, S.C., Majluf, N.S., (1984). Corporate financing and investment decisions when firms have information that investors do not have. Journal of Financial Economics. 13 (2), 187–221.
Pfeffer, J., (1996). Competitive Advantage through People. Harvard Business School Press, Boston, MA.
Pinnuck, M., & Lillis, A.M. (2007). Profits versus losses: Does reporting an accounting loss act as a heuristic trigger to exercise the abandonment option and divest employees? The Accounting Review, 82(4), 1031-1053.
Rego, S.O., (2003). Tax-avoidance activities of U.S. multinational corporations. Contemporary Accounting Research. 20 (4), 805–833.
Rego, S.O., Wilson, R., (2012). Equity risk incentives and corporate tax aggressiveness. Journal of Accounting Research. 50 (3), 775–810.
Richardson, S., (2006). Over-investment of free cash flow. Review of Accounting Studies. 11 (2–3), 159–189.
Stein, J.C., (2003). Agency, information, and corporate investment. In: George, M., Constantinides, M.H., Stultz, R.M. (Eds.), Handbook of the Economics of Finance. Elsevier North-Holland, Amsterdam, pp. 111–163.
Tahriri, A., and Khoeini, M. (2017). Internal information quality, disclosure quality and firms` tax avoidance, Journal of Financial Accounting Knowledge, 4(12): 101–120. (In Persian)
Taylor, G., Al-Hadi, A., Rochardson, G. & Alfarhan, U. (2019). Is there a relation between labor investment inefficiency and corporate tax avoidance? Economic Modeling, Vol. 82, pp. 185-201.
Taylor, G., Richardson, G. (2014). Incentives for corporate tax planning and reporting: empirical evidence from Australia. Journal of Contemporary Accounting & Economics. 10 (1), 1–15.
Tehrani, R., and Hesarzadeh, R. (2009). The effect of free cash flow and financing constraints on over-investment and under-investment, Journal of Accounting and Auditing Research, 1(3): 50–67. (In Persian)
Zhang, Z., Ntim, C.G., Zhang, Q., & Elmagrhi, M.H. (2020). Does accounting comparability affect corporate employment decision-making? The British Accounting Review, 52(6), 1-23.
Zimmerman, J. L. (1983). Taxes and firm size. Journal of Accounting and Economics, Vol. 5, pp. 119-149.
 
    • Article View: 2,079
    • PDF Download: 688
Financial Accounting Knowledge
Volume 8, Issue 4 - Serial Number 31
January 2022
Pages 109-133
Files
  • XML
  • PDF 1.29 M
Share
How to cite
  • RIS
  • EndNote
  • Mendeley
  • BibTeX
  • APA
  • MLA
  • HARVARD
  • CHICAGO
  • VANCOUVER
Statistics
  • Article View: 2,079
  • PDF Download: 688

APA

Rezaei, G. , Taghizadeh, R. , Sadeghzadeh Maharlui, M. and Zeraatgari, R. (2022). The effects of labor investment inefficiency on corporate tax avoidance activities. Financial Accounting Knowledge, 8(4), 109-133. doi: 10.30479/jfak.2021.15873.2888

MLA

Rezaei, G. , , Taghizadeh, R. , , Sadeghzadeh Maharlui, M. , and Zeraatgari, R. . "The effects of labor investment inefficiency on corporate tax avoidance activities", Financial Accounting Knowledge, 8, 4, 2022, 109-133. doi: 10.30479/jfak.2021.15873.2888

HARVARD

Rezaei, G., Taghizadeh, R., Sadeghzadeh Maharlui, M., Zeraatgari, R. (2022). 'The effects of labor investment inefficiency on corporate tax avoidance activities', Financial Accounting Knowledge, 8(4), pp. 109-133. doi: 10.30479/jfak.2021.15873.2888

CHICAGO

G. Rezaei , R. Taghizadeh , M. Sadeghzadeh Maharlui and R. Zeraatgari, "The effects of labor investment inefficiency on corporate tax avoidance activities," Financial Accounting Knowledge, 8 4 (2022): 109-133, doi: 10.30479/jfak.2021.15873.2888

VANCOUVER

Rezaei, G., Taghizadeh, R., Sadeghzadeh Maharlui, M., Zeraatgari, R. The effects of labor investment inefficiency on corporate tax avoidance activities. Financial Accounting Knowledge, 2022; 8(4): 109-133. doi: 10.30479/jfak.2021.15873.2888

  • Home
  • About Journal
  • Editorial Board
  • Submit Manuscript
  • Contact Us
  • Sitemap

News

Financial Accounting Knowledge, is licensed under a Creative Commons Attribution 4.0 International License (CC BY NC) .

 

Newsletter Subscription

Subscribe to the journal newsletter and receive the latest news and updates

© Journal Management System. Powered by Sinaweb