{"title":"Nexus between profitability, firm size and leverage and tax avoidance: evidence from an emerging economy","authors":"Md Shamim Hossain, Md.Sobhan Ali, Md Zahidul Islam, Chui Ching Ling, Chorng Yuan Fung","doi":"10.1108/ara-08-2023-0238","DOIUrl":null,"url":null,"abstract":"<h3>Purpose</h3>\n<p>This study examines the impact of profitability, firm size and leverage on corporate tax avoidance in Bangladesh, an emerging South Asian economy.</p><!--/ Abstract__block -->\n<h3>Design/methodology/approach</h3>\n<p>A balanced panel data of 62 firms from Dhaka and Chittagong stock exchanges in Bangladesh from 2009 to 2020 were used to run the regression. This study employed the fully modified ordinary least squares (FMOLS) and dynamic ordinary least squares (DOLS) to examine the hypotheses.</p><!--/ Abstract__block -->\n<h3>Findings</h3>\n<p>The findings show that large firms positively impact corporate tax avoidance. Similarly, profitability and leverage are positively associated with tax avoidance, and the results are significant. Furthermore, the study conducts robustness tests that confirm the findings.</p><!--/ Abstract__block -->\n<h3>Research limitations/implications</h3>\n<p>The use of cash effective tax rate (ETR) to investigate firms’ tax avoidance practices poses some limitations, and the results should be interpreted cautiously.</p><!--/ Abstract__block -->\n<h3>Practical implications</h3>\n<p>The current study may help policymakers better enhance tax collection from business firms. The findings could serve as a valuable input for effectively monitoring tax collection from large profit-earning firms.</p><!--/ Abstract__block -->\n<h3>Originality/value</h3>\n<p>To the authors' best knowledge, this is the first historical attempt in Bangladesh to use panel data to examine the relationship between the firm’s level characteristics and corporate tax avoidance. Panel data often provides greater flexibility with large data, simplifying calculation and statistical analysis.</p><!--/ Abstract__block -->","PeriodicalId":8562,"journal":{"name":"Asian Review of Accounting","volume":null,"pages":null},"PeriodicalIF":2.3000,"publicationDate":"2024-02-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Asian Review of Accounting","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.1108/ara-08-2023-0238","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
Abstract
Purpose
This study examines the impact of profitability, firm size and leverage on corporate tax avoidance in Bangladesh, an emerging South Asian economy.
Design/methodology/approach
A balanced panel data of 62 firms from Dhaka and Chittagong stock exchanges in Bangladesh from 2009 to 2020 were used to run the regression. This study employed the fully modified ordinary least squares (FMOLS) and dynamic ordinary least squares (DOLS) to examine the hypotheses.
Findings
The findings show that large firms positively impact corporate tax avoidance. Similarly, profitability and leverage are positively associated with tax avoidance, and the results are significant. Furthermore, the study conducts robustness tests that confirm the findings.
Research limitations/implications
The use of cash effective tax rate (ETR) to investigate firms’ tax avoidance practices poses some limitations, and the results should be interpreted cautiously.
Practical implications
The current study may help policymakers better enhance tax collection from business firms. The findings could serve as a valuable input for effectively monitoring tax collection from large profit-earning firms.
Originality/value
To the authors' best knowledge, this is the first historical attempt in Bangladesh to use panel data to examine the relationship between the firm’s level characteristics and corporate tax avoidance. Panel data often provides greater flexibility with large data, simplifying calculation and statistical analysis.
期刊介绍:
Covering various fields of accounting, Asian Review of Accounting publishes research papers, commentary notes, review papers and practitioner oriented articles that address significant international issues as well as those that focus on Asia Pacific in particular.Coverage includes but is not limited to: -Financial accounting -Managerial accounting -Auditing -Taxation -Accounting information systems -Social and environmental accounting -Accounting education Perspectives or viewpoints arising from regional, national or international focus, a private or public sector information need, or a market-perspective or social and environmental perspective are greatly welcomed. Manuscripts that present viewpoints should address issues of wide interest among accounting scholars internationally and those in Asia Pacific in particular.