Influence Tax Avoidance on Bank Loan Contracts with Emphasis on the Moderating Role of Disclosure Quality

Subject Areas : • Risk management and its new technologies

Peyman Amini ¹ , Mohammad Omid Akhgar ² , Arman Moradi ³

1 - Assistant Professor, Accounting Department, University of Kurdistan, Sanandaj, Iran
2 - Assistant Professor, Accounting Department, University of Kurdistan, Sanandaj, Iran
3 - Accounting Department, University of Kurdistan, Sanandaj, Iran

Received: 2024-08-17 Accepted : 2024-12-06 Published : 2024-12-20

Keywords: Tax avoidance, Bank loan contracts, Disclosure quality.,

Abstract :

Objectives: This research aims to investigate the influence of tax avoidance on bank loan contracts, with a focus on the moderating role of disclosure quality from 2013 to 2019.

Design/methodology/approach: The methodology involved gathering data through document mining and referencing bank information. Regression models, including ordinary least squares and logistic methods, were used to fit the data. The panel data model was utilized to test the research hypotheses.

Results: Tax avoidance was found to have a positive effect on bank loan contracts. The impact of disclosure quality on this relationship varied depending on the criteria used to measure tax avoidance. When the effective rate of cash tax paid was used, tax avoidance reduced the three criteria of bank loan structure, cost, and collateral. When using the book tax difference criterion, tax avoidance also reduced the three criteria of structure, cost, and risk of non-payment of bank loans.

Innovation: By focusing on the quality of disclosure as a mechanism to reduce information asymmetry and agency costs, the negative effects of tax avoidance on bank loan contracts can be mitigated.

References:


Ebrahimi, Seyyed Kazem; Behraminsab, Ali; Hassanzadeh, Mehdi (2016). "Analysis of the quality of financial reporting and tax avoidance in the light of government ownership and political connections".Scientific quarterly_ Management research of government organizations, fifth period, number 2, pp. 61-76.
Ahmedpour, Ahmad; Kashanipour, Mohammad; Shejaei, Mohammad Reza (2009). "Investigating the impact of corporate governance and audit quality on financing costs". review¬Accounting and auditing, Volume 17, Number 4, pp. 32-62.
Hajiha, Venus; Taghi¬Zadeh, Nafiseh (2017). "Customer concentration and bank loan contracts: Evidence from Tehran Stock Exchange". Review Quarterly¬Accounting and auditing, 25(3), pp. 327-346.
Haqit, Hamid and Mohammadi, Mohammad Hassan (1392)."Investigating the relationship between tax avoidance and disclosure qualityAand RZCompany Sh".Journal of quantitative studies in management, Volume 4, Number 1, pp. 209-288.
Heydari, Dr. Omidpour andHemti(1383)."Examining the effect of debt contracts,Political expenses,Bonus plans and ownership on profit management in companies accepted in Tehran Stock Exchange".Accounting and auditing quarterly, 11th period, number 2, pp. 47-63.
Khodamipour, Ahmed and Meisham Amininia (2012)."Investigating the relationship between tax avoidance and the cost of debt and the effect of institutional ownership on this relationship", a publicationResearch papertax,Period 21, number 19.
KhajoY,Thank God,Mumtazian,Alireza(2013), "review The effect of quality disclosure Information finance on Yield current and ati shares", knowledge Accounting finance,1(1), 9-27.
Dayanti Dilmi, Zahra and Parisa Shekrallahi (2014). "Investigation of the effect of corporate governance system on the relationship between tax avoidance and the value and amount of cash retention".Experimental accounting researches, fourth term, no3, pp. 39-61.
Satish, Mohammad Hossein Rezaei, Gholamreza; Ziari, Sara and Fatemeh Kazemnejad (2012) "Investigation of the relationship between the quality of financial information and the limitation of financing of companies admitted to the Tehran Stock Exchange".Financial Accounting Quarterly, Year 5, Number 19, pp. 21-45.
Foroughi, Dariush and Farjami, Maleeha (2014). The effect of price concurrency and stock return fluctuations on stock liquidity in companies listed on the Tehran Stock Exchange, asset management and financing.3(4),85-98.
victim, Behzad; Foroughi,Darius; Amiri, conductor; Hashemi, Sayyed Abbas(2012).quality reporting finance and swing Yield unorthodox stock.knowledge finance analysis papers Bhadhar6(No1(in a row17)), 45-61.
Mojtahedzadeh, Vida; Abu Hamzah, Mina; Mirzaei, Mohammad Mehdi (1394)."The effect of the quality of corporate disclosure on the reduction of tax evasion of companies admitted to the Tehran Stock Exchange". Experimental accounting research, 3(4),pp. 1-21.
Molanazari, Mahnaz; Hejazi, Rizvan; Sahrai, Mohammad (2010). "Investigation of the relationship between the method¬financing (external sources) and success and failure of the company-accepted in the Tehran Stock Exchange". Financial Accounting and Audit Research Journal, Volume 2, Number 6, pp. 65-86.
Monajati, Reza, Moshein, Mohsen and Tavaklian, Hossein (2012). Principles of Capital Market, Negah Danesh Publications, Tehran.
Mahdavi,Gholam Hossein,Behpur,Sajjad,Kazem race,Fatima(2013)."Review relationship Reciprocal quality disclosure and performance Companies accepted‎done in stock market papers Bhadar Tehran with use from System Equations at the same time.Reviews Accounting and audit,21(3), 371-386.
References
Ahmadpour, A., Kashanipour, M., Shojaei, M. (2010). The effect of Corporate Governance, and Audit Quality on Cost of Debt Financing. Accounting and Auditing Review, 17(4), 17-48[In Persian].
Aivazian, VA, Qiu, J., & Rahaman, MM (2015). Bank loan contracting and corporate diversification: Does organizational structure matter to lenders? Journal of Financial Intermediation, 24(2), 252-282.
Beladi, H., Chao, CC, & Hu, M. (2018). Does tax avoidance behavior affect bank loan contracts for Chinese listed firms? International Review of Financial Analysis, 58, 104-116.
Bharath, S., Sunder, J., Sunder, S., (2008). "Accounting quality and debt contracting". Accounting Review 23, 1–28.
Desai, MA, & Dharmapala, D. (2009). "Corporate tax avoidance and firm value". The review of Economics and Statistics, 91(3), 537-546.
Dianatidilami, Z., shokrollahi, P. (2015). The Effect of Corporate Governance Structure on the Relationship between Tax Avoidance and Corporate Cash Holdings Level and Value. Empirical Research in Accounting, 4(3), 39-62[In Persian].
Dias Duartea, Fábio, Paula Matias Gamaa, Ana, Paulo Esperanc, José (2017). "Collateral-based in SME lending: The role of business collateral and personal collateral in less-developed countries". Research in International Business and Finance. 39: 406–422.
Dyreng, SD, Hanlon, M., & Maydew, EL (2008). "Long-run corporate tax avoidance". The accounting review, 83(1), 61-82.
Ebrahimi, S., Bahraminasab, A., Hasanzadeh, M. (2017). The Analysis of Financial Reporting Quality and Tax Avoidance According to Governmental Ownership and Political Connections. Quarterly Journal of Public Organizations Management, 5(2), 61-76[In Persian].
Foroghi, D., Farjami, M. (2016). The Impact of Stock Price Synchronicity and Stock Return Volatilities on the Stock Liquidity for Companies Listed in Tehran Stock Exchange. Asset Management and Financing, 3(4), 85-98[In Persian].
Ge, W., Kim, JB, & Song, BY (2012). "Internal governance, legal institutions and bank loan contracting around the world". Journal of Corporate Finance, 18(3), 413-432.
Ghorbani, B., Foroughi, D., Amiri, H., Hashemi, S. (2013). Financial reporting quality and boom in stock returns. Financial Knowledge of Securities Analysis. 6, 45-61[In Persian].
Graham, JR, Li, S., Qiu, J. (2008), "Corporate misreporting and bank loan contracting". Journal of Financial Economics, 88(3), 44-61.
Haghighat, H., Mohammadi, M. (2013). Tax Avoidance, Corporate Transparency, and Firm Value. Quantitative Researches in Management, 4(1), 209-228[In Persian].
Hajiha, Z., Taghizadeh, N. (2018). Customer Concentration and bank loan contracts: Evidence from the Tehran Stock Exchange. Accounting and Auditing Review, 25(3), 327-346[In Persian].
Hanlon, M., & Heitzman, S. (2010). "A review of tax research". Journal of accounting and economics, 50(2-3), 127-178.
Hasan, I. & Song, L. (2014). "Public disclosure and bank loan contracting: evidence from emerging markets". Asian Review of Accounting, 22 (1), 2-19.
Heidari, O., Hemmati, D. (2004). Investigate the effect of debt contracts. Political costs. Bonus plans. And Ownership of Earnings Management in Companies Listed in Tehran Stock Exchange. Accounting and Auditing Review, 11 (2), 47-63[In Persian].
Hendrickson (1992). Accounting Theory, 185-187.
Hope, OK, Thomas, WB, & Vyas, D. (2009). "Transparency, ownership, and financing constraints in private firms". Journal of Accounting Research, 46(3), 591-626.
Hopkins, P. (1996). "The Effect of financial statement classification of hybrid financial instruments on financial analysis stock price judgments". Journal of Accounting Research, 43: 33-50.
Hussainey, KH. & Mouselli, S. (2010). "Disclosure quality and stock returns in the UK". Journal of Applied Accounting Research, 11(2): 154-174.
Khajavi, S., Momtazian, A. (2014). Investigation The quality of financial information disclosure effect on current and future stock return of listed companies of Tehran Stock Exchange. Journal of Financial Accounting Knowledge, 1(1), 9-27[In Persian].
Khodamipour, A., Amini Nia, M. (2013). Investigate the relationship between tax avoidance and debt costs and the impact of institutional ownership on this relationship. Tax Research Quarterly, 21 (19), 156-135[In Persian].
Kim, JB, Li, OZ, & Li, Y. (2010). "Corporate tax avoidance and bank loan contracting". Available at SSRN 1596209.
King, R. (1996). "Reputation formation for reliable reporting". An experimental investigation. The Accounting Review, 71(3): 375-396.
Mahdavi, G., Behpour, S., Kazemnezhad, F. (2014). Exploring the Relationship between Disclosure Quality and the Performance of Tehran Stock Exchange Companies Using a Simultaneous Equations System. Accounting and Auditing Review, 21(3), 371-386[In Persian].
Manzon Jr, GB, & Plesko, GA (2001). "The relationship between financial and tax reporting measures of income". Tax L. Rev. 55, 175.
McNichols, MF, & Stubben, SR (2008). "Does earnings management affect firms' investment decisions?" The accounting review, 83(6), 1571-1603.
Melnik, A., & Plaut, S. (1986). "Loan commitment contracts, terms of lending, and credit allocation". The Journal of Finance, 41(2), 425-435.
Menajati, R., Motmaen, M., Tavakolian, Hossein (2013). Principles of Capital Market, Naghsh Danesh Publications, Tehran.[In Persian].
Ming, F., Qiliang, L., & Wei, L. (2015). Heterogeneous Beliefs, Financial Reporting Quality and Idiosyncratic Volatility——A Research Based on Difference Model. Review of Investment Studies, 9, 012.
Mojtahedzadeh, V., Abouhamzeh, M., Mirzaee, M. (2015). Corporate Disclosure Quality and Tax Noncompliance. Empirical Research in Accounting, 4(3), 1-21[In Persian].
Mollnazari, M., Hajazi, R., Sahraie, M. (1389). Investigating the relationship between financing methods (outsourced resources) and success and failure of listed companies in Tehran Stock Exchange. Financial Accounting and Auditing Research, 2 (6), 65-86[In Persian].
Pasternak, M., & Rico, C. (2008). "Tax Interpretation, Planning, and Avoidance: Some Linguistic Analysis". Akron Tax Journal, 23(1), 2.
Pownall, G., & Schipper, K. (1999). "Implications of accounting research for the SEC's consideration of International Accounting Standards for US securities offerings". Accounting Horizons, 13(3), 259-280.
Praise, M., Rezaei, Ziyari, & Kazemnejad, F. (2013). Investigating the Relationship between Financial Information Quality and Limitation on Financing of Companies Listed in Tehran Stock Exchange. Financial Accounting Quarterly, 5 (19), 21-45[In Persian].
Singhavi, SS, & Desai, HB (1971). "An empirical analysis of the quality of corporate financial disclosure". The Accounting Review, 46(1):129-138.
Slemrod, J (2004). "The economics of corporate tax selfishness". National Tax Journal, 57, 877-99.
Wallace, RSO, Naser, K., & Mora, A. (1994). "The relationship between the comprehensiveness of corporate annual reports and firm characteristics in Spain". Accounting and Business Research, 25(97):41-53.