Application of conflict of interest theory in explaining the role of government ownership in the relationship between unusual transactions with related parties and tax avoidance
The application of the theory of agency conflict in explaining the role of state ownership in the relationship between related party transactions and tax avoidance
Subject Areas : Management Accounting
Sayed mahdi Hossaini harandi 1 , Mohsen Sadeghi 2 * , Meysam forooghi 3
1 - Ph. d candidated, Department of accounting, mobarakehbranch, islamicazad university, Isfahan, iran
2 - Assistant professor, Department of accounting, mobarakehbranch, islamicazad university, Isfahan, iran (corresponding. author).
3 - Assistant professor, Department of accounting, mobarakehbranch, islamicazad university, Isfahan, iran
Keywords: Related Party transactions, Unusual Related Party transactions, Tax Avoidance, State Ownership,
Abstract :
In modern economies, taxation is the most important source of government revenue. On the other hand, since taxes reduce the wealth and value of companies, companies are always looking for ways to avoid paying taxes. Among these ways, one can refer to related party transactions and transfer pricing. In this context, state-owned companies can act as an effective corporate governance mechanism against management actions such as related party transactions with the intention of tax avoidance due to their role in protecting government interests. Given the above, the aim of this research is to examine the relationship between related party transactions and tax avoidance considering the moderating effect of state ownership. This research is applied in terms of purpose and descriptive-correlational in terms of method. The researcher found that related party transactions and tax avoidance have a significant positive relationship using a sample of 283 accepted companies on the Tehran Stock Exchange during 1389-1400 and multiple linear regression, while there is no significant relationship using the cash effective tax rate index. Furthermore, the results showed that state ownership has a significant negative impact on the relationship between related party transactions and tax avoidance. However, this study's results indicate that regulatory framework should be reconsidered for considering related party transactions to protect minority shareholders' interests in non-state-owned companies.