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Investigating the relationship between the Institutional Investors’ Distraction and tax avoidance

    Authors

    1 Associate professor, Departement of Accounting, Shahid Chamran University of Ahvaz, Ahvaz, Iran

    2 Asistance Prof in Accounting, Maragheh Branch, Islamic Azad University, Maragheh, Iran

    3 Educator of Accounting, Shahid Chamran University of Ahvaz, Ahvaz, Iran

    4 Ph.D. Candidate, Departement of Economics, Shahid Chamran University of Ahvaz, Ahvaz, Iran

,

Document Type : Research Paper

Abstract

Purpose: The scope of this study is to investigate the effect of institutional shareholders' regulatory aspect on joint stock companies on topic of tax reductive policies. Since institutional shareholders are usually large and powerful shareholders of companies, it is natural that increase or decrease in their regulatory aspect has such a significant impact on managerial behaviors.
Method: In this study, data from 83 companies listed in Tehran Stock Exchange between years 2012 and 2019 were gathered and analyzed.
Results: Results of the first and the second hypotheses of the research indicate that there is an inverse and significant relation between institutional shareholders’ distraction and the effective rate of tax on cash and total book-tax differences, and the results of the third and the fourth hypotheses of the research indicate that in large corporations, relation between the mentioned variables is different.
Conclusion: The findings of the present study suggest that within the examined firms, the institutional shareholders’ distraction results in the equitable determination of tax liabilities, albeit coupled with tax evasion. Additionally, in larger corporations, the distraction and neglection of institutional shareholders contribute to the fair recognition and payment of taxes. This is attributed to the propensity of institutional shareholders to evade both the identification and settlement of tax obligations.
Contribution: In the context of this study, the influence of institutional shareholders’ distraction emerges as a novel variable. Given that this variable, which is a significant mechanism of corporate governance, has not been previously quantified in relation to tax avoidance, it offers a potential explanation for observed market phenomena.

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Main Subjects

References
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Financial Accounting Knowledge
Volume 10, Issue 4 - Serial Number 39
January 2024
Pages 57-79
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