THE ECONOMIC CONSEQUENCE OF INTERNATIONAL FINANCIAL REPORTING STANDARDS ADOPTION: EVIDENCE FROM CORPORATE TAX AVOIDANCE IN GULF STATES

Enas Abdullah Hassan

Accounting & Taxation, 2020, vol. 12, issue 1, 45-65

Abstract: We examine whether IFRS as an accounting standard affects firm-level tax avoidance in the context of six economies across the Gulf region. We use a sample of 3,393 publicly listed firm-year observations from 2010 to 2016. Results show that firms adopting higher levels of harmonization with IFRS (full adoption) in the preparation of their financial reports engage less in tax avoidance activities. In contrast, nonadopting IFRS or adopting IFRS with modifications might be not only inappropriate and irrelevant, but also significantly harmful to reporting quality. We use two models in addition to OLS model. The overall results from both the logistic model and quantile model provide extra support to the OLS results. However, when other control variables are introduced in the main model (i.e. reporting losses, institutional ownership concentration and Big N auditors), the results suggest that in the context of GCC countries institutional ownership and Big N auditors, as external governances play negative role in monitoring managerial activities including the tax function. The findings of this paper have implications for tax authorities, investors and researchers

Keywords: International Financial Reporting Standards; Tax Avoidance; Gulf Region (search for similar items in EconPapers)
JEL-codes: H26 M41 (search for similar items in EconPapers)
Date: 2020
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