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Title: Essays on tax avoidance
Author: Pipatnarapong, Jirarat
ISNI:       0000 0004 9353 2603
Awarding Body: Bangor University
Current Institution: Bangor University
Date of Award: 2020
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This thesis examines three topical, yet contentious issues linked to tax avoidance using a sample of firms domiciled in the BRICS countries: Brazil, Russia, India, China, and South Africa. The three issues examined in this study are: the relationship between tax avoidance and (i) corporate social responsibility (CSR); (ii) earnings management; and (iii) accounting conservatism. Using listed firms domiciled in BRICS countries for the period from 2008 to 2015, the first study examines the relationship between tax avoidance and CSR. The results show that the effective tax rate is positively associated with scores on CSR performance, suggesting that firms domiciled in BRICS with higher CSR performance pay higher taxes at the same time. The results imply that firms in BRICS countries are willing to accept compromise in the pursuit of shareholder profit by pursuing a combined strategy of tax compliance and CSR engagement. This study also shows that audit expertise plays a significant role in the effect of CSR on the level of tax paid. Moreover, the findings are robust to different approaches, including the use of alternative measures of tax avoidance and the level of CSR performance, as well as using the 2SLS model to mitigate the endogeneity issues. The second study investigates the association between tax avoidance and the degree of earnings management. While most prior studies focus only on discretionary accruals, this study employs both accruals-based and real-activities techniques as proxies for earnings management. The results show a strong and positive relationship between tax avoidance and accruals-based earnings management. However, the relationship between tax avoidance and real-activity earnings management results is in the opposite direction. These results suggest that nonconformity between financial accounting standards and tax rules allows managers to make discretion only on accruals to manage book income upwards and taxable income downwards in the same reporting period. The findings are robust to different alternative analyses including a different level of earnings management, a different level of tax avoidance, and endogeneity concerns. The third study investigates the relation between tax avoidance and the degree of accounting conservatism, where conservatism refers to the delay in income recognition in the financial report. Specifically, the primary objective is to examine whether firms employ conservative accounting either through conditional conservatism or unconditional conservatism in reducing tax liability. Using a dataset of listed firms domiciled in BRICS during the period 2006–2018, the results show that conditional conservatism is positively and significantly associated with tax avoidance. In contrast, unconditional conservatism is negatively and significantly associated with tax avoidance. These findings suggest that the two forms of conservatism play a distinct role in tax incentives. This thesis provides important insights for policymakers that the inclusion of responsible tax payment as part of a global CSR agenda may motivate firms to align their behavior with respect to tax payment. Moreover, this thesis recommends to regulatory agencies that the high level of accrual-based earnings management and the high level of conditional conservative accounting could indicate tax avoidance engagement. Hence, it is vital for relevant parties to take into account the effects of tax avoidance when drafting new and updating old accounting standards. Finally, analysts and investors who are interested in firms’ tax avoidance activities and use the accounting numbers to evaluate the extent of tax avoidance when making investment decisions to adjust their portfolios should also take into consideration the effects of earnings management and accounting conservatism.
Supervisor: Jaafar, Aziz Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available
Keywords: Tax Avoidance ; Earnings Management ; Accounting Conservatism ; Corporate Social Responsibility ; BRICS ; Agency Theory ; Organised Hypocrisy ; Legitimacy Theory ; Corporate Culture ; Stakeholder Theory ; Risk Management ; Brazil ; Russia ; India ; China ; South Africa