Access to finance and corporate tax avoidance: International evidence

Ramzi Benkraiem (), Safa Gaaya (), Faten Lakhal and Merve Kilic
Additional contact information
Ramzi Benkraiem: Audencia Business School
Safa Gaaya: DVHE - De Vinci Higher Education
Faten Lakhal: DVHE - De Vinci Higher Education
Merve Kilic: DEÜ - Dokuz Eylül Üniversitesi = Dokuz Eylül University [Izmir]

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Abstract: This paper investigates the relationship between access to finance and corporate tax avoidance. Using a sample of 63,443 firm-year observations from 37 countries, the results reveal that firms suffering from limited access to finance are more inclined to engage in tax avoidance practices. This result supports the pecking-order theory and suggests that managers may rely on cash flows generated from tax-saving activities to finance their investments. The results also show that increased levels of financial constraints are positively associated with tax avoidance in the presence of high economic policy uncertainty (EPU). We also show that this effect is more prevalent in firms operating in countries with high government debt levels, and with weak investor protection. Our results are robust after addressing endogeneity concerns and using different measures of financial constraints, tax avoidance, and additional control variables.

Keywords: Access to finance; corporate tax avoidance; International evidence (search for similar items in EconPapers)
Date: 2025-06
Note: View the original document on HAL open archive server: https://hal.science/hal-05143196v1
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Published in Journal of International Accounting, Auditing and Taxation, 2025, 58 (june), pp.100668. ⟨10.1016/j.intaccaudtax.2024.100668⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05143196

DOI: 10.1016/j.intaccaudtax.2024.100668

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