Investigating the Effect of Tax Avoidance on cost of equity, with considering growth opportunities and institutional ownership (in Persian)

Omid Pourheidari (), Meysam Amini Nia () and Mohammad Hasan Fadavi ()
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Omid Pourheidari: Shahid Bahonar University of Kerman
Meysam Amini Nia: Shahid Bahonar University of Kerman
Mohammad Hasan Fadavi: Shahid Bahonar University of Kerman

The Journal of Planning and Budgeting (٠صلنامه برنامه ریزی و بودجه), 2014, vol. 19, issue 3, 173-190

Abstract: The purpose of this study is investigating the effect of tax avoidance on the cost of equity firms listed in Tehran Stock Exchange. The study sample consists of 75 Firms listed in Tehran stock Exchange during the 2001 to 2010. Effective tax rate is used as measurement of tax avoidance. In order to testing the research hypothesizes, Ordinary Least Squares regression (OLS) and Panel Data have been used. The results showed that tax avoidance reduce cost of equity. In other word, firms by investing the cash from of tax avoidance, will increase future cash flow and thereby decrease cost of equity. It was expected that negative relationship between tax avoidance and cost of equity is stronger for firms with strong external monitoring and higher growth opportunities. But the results indicate that growth opportunities and institutional ownership don’t have significant effect on the relationship between tax avoidance and cost of equity.

Keywords: Tax Avoidance; Effective Tax Rate; Cost of Equity; growth opportunities; institutional ownership (search for similar items in EconPapers)
Date: 2014
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