Investigating the relationship between tax avoidance and abnormal delay in financial reporting of companies listed on the Tehran Stock Exchange

Master's thesis

Accounting field

Audit orientation

Abstract

The purpose of this research is to investigate the relationship between tax avoidance and abnormal delay in financial reporting of companies admitted to the Tehran Stock Exchange. In terms of the research method, this research is a descriptive-analytical research of the correlation and regression analysis type and based on panel data analysis. In this research, the financial information of 82 companies admitted to the Tehran Stock Exchange during the period from 2014 to 2011 has been examined (656 companies-year). Eviews 8 software was used to analyze the results of the research. The results of the research in connection with the investigation of the first hypothesis of the research showed that there is no significant and inverse relationship between the effective tax rate and the abnormal delay in approving the company's annual profit. In the following, according to the analyzes carried out in connection with the investigation of the second hypothesis of the research, we came to the conclusion that there is no significant and inverse relationship between the effective rate of cash tax paid and the unusual delay in approving the company's annual dividend. Finally, the results of the research in connection with the examination of the third hypothesis of the research indicated that there is no significant and direct relationship between the book tax difference and the abnormal delay in the approval of the company's annual dividend.

Key words:

tax avoidance, abnormal delay in financial reporting, effective tax rate, tax book difference.

Introduction

in In the first chapter, after stating the problem and how to choose the research topic, we examine the importance and necessity of research and the basics of research; Then we state the objectives of the research and continue to state the hypotheses of the research. Also, we describe the method, tools for collecting and analyzing information, the territory and the statistical population of the research in the form of separate paragraphs. The operational definitions of the research keywords are also given in this chapter and finally the general structure of the research is mentioned. 1-2) Statement of the problem and how to choose the research topic Timeliness is considered one of the most important quality characteristics of financial information. The shorter the time interval between the end of the financial year and the publication date of the financial statements of the business units, the greater the usefulness of the annual audited financial statements of the business units. Increasing the time interval between the end of the financial year and the date of publication of financial statements increases the possibility of disclosure of information to the benefit of a group of users and to the detriment of others (Moradi, Mehdi and Pourhosseini Seyed Mehdi; 1388). Parmalat [4] at the world level and the fall of the Tehran Stock Exchange indices in 2013, the issue of transparency of financial statements as a necessary phenomenon gained more importance. Since the disclosure of accounting frauds and tax concealment of companies in the last 2 decades, legislators and academics have paid attention to daring tax reporting and the timing of financial reporting. Despite this, managers sometimes use the methods chosen for tax purposes for financial reporting and vice versa, when the benefits of this work are greater than its costs. Among the benefits of this work will be avoiding additional proceedings and possible crimes from the tax authority. But this alignment of procedures may also include non-tax costs, for example, using the first-out-first-in method [5] (FIFO) for inventories may lead to understating the profit and, as a result, the desired tax, the advantage or benefits of which will be to keep more cash for the company. But on the other hand, lower profit from the point of view of the company's creditors may lead to higher interest cost for the company (Cloyd [6], 1996). The result of applying and considering the aforementioned benefits and costs by the management will lead to the difference between the pre-tax profit reported in the profit and loss statement and the taxable profit (tax book difference) (Mills [7], 2001). Therefore, the method of estimating the taxable profit or, more precisely, the book tax difference and tax payments are among the very important factors through which tax avoidance can be measured.Therefore, tax avoidance can be a reflection of agency problem theory and may lead to tax decisions that follow the manager's self-interest. Therefore, one of the challenges facing shareholders and the board of directors is to find control methods and incentives to minimize agency costs (Jensen and McElhinney [8], 1976). Desai et al. [9] (2007) also believe that managers who seek their own interests complicate the company's structure and make transactions that reduce taxes, and in this way use the company's resources for their own interests. In this research, we are looking to know if the companies that have tax avoidance measures disclose their financial reporting on time to the stakeholders (shareholders, investors, creditors) and other legal entities.

1-3) Importance and necessity of research

Taxes as the main means of earning money for governments to achieve economic goals are of particular importance. The expansion and diversity of economic activities, as well as the increasing role of governments in creating and expanding public services, social security, and the expansion of government obligations in the economic and social fields, and efforts to achieve economic growth and fair distribution of income, have made paying and receiving taxes an important and effective issue. In any country, tax as one of the main tools of the government in the economy plays a very important role in such a way that today in industrialized countries, improving and developing the efficiency and effectiveness of taxpayers' tax declaration and demanding it from tax experts, while observing the principle of tax justice, has become very important (Pezhoyan, Jamshid 1380). is the law, it is defined (Pasternak and Rico [10], 2008) Tax avoidance is related to illegal activity that reduces government revenues that are needed for infrastructure and welfare and public services (Atsania [11], 2011). As a result, tax avoidance is becoming the main concern of governments (Graville [12], 2009). Imagining the results of tax avoidance can be the most important discussion in research on this issue. .

The importance of the topic and the relationship between tax avoidance and abnormal delay in financial reporting on the one hand and the lack of foreign and domestic research on the other hand is the main motivation for conducting this research. The present study investigates whether tax avoidance can cause an unusual delay in providing financial reports of companies to shareholders (actual investors), potential capital, creditors, and other legal entities in order to make appropriate and timely decisions.  The current research is different from internal research in measuring tax avoidance, control variables and how to calculate abnormal delay in financial reporting. It is possible that there is a positive and significant relationship between stock marketization on the degree of liquidity and price stability of those companies.

1-4) Research Objectives

The purpose of this research is to complete the existing gap in the subject literature by investigating the answer to the question of what is the relationship between tax avoidance and abnormal delay in financial reporting of companies listed on the Tehran Stock Exchange. The objectives of the research in two parts include practical objectives and practical objectives as follows.

1-4-1) Scientific objectives

The importance of the issue and how the relationship between tax avoidance and abnormal delay in financial reporting on the one hand and the lack of foreign and domestic research on the other hand became the main motivation for conducting this research, although more academic research has been conducted both inside the country and abroad, in connection with tax avoidance and the impact of various factors, but nevertheless, most of these researches It is focused on the influence of various factors and variables on internal company policies and laws, and until now no research has been conducted on the relationship between tax avoidance and abnormal delay in financial reporting in Iran, therefore, the current research in measuring tax avoidance, control variables and how to calculate abnormal delay in financial reporting is completely different from internal research, and with its innovative aspect, it seeks to improve the theoretical foundations and enrich the literature on the subject.

1-4-2) Functional Objectives

For profit information to be relevant, it should be quickly disseminated in the market and available to users.