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Analyzing the Causal Relationship Between Tax Avoidance and Earnings Management: Evidence from The STOXX Europe 600 Index

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  • Olfa Ben Salah

    (Faculty of Economics and Management of Sfax, University of Sfax, Tunisia)

Abstract

Research Question- Can a bidirectional link be established between earnings management and tax avoidance? Motivation- The relationship between tax avoidance and earnings management has been a subject of significant scholarly interest, yet it remains inconclusive and context-dependent. Idea- This study seeks to examine the bidirectional causality between tax avoidance and earnings management. Data- The author selected companies listed on the European STOXX 600 index for the period from 2010 to 2022. Tools- To test the research hypothesis, the author employs the Granger causality procedure on panel data and applies a dynamic panel using the Generalized Method of Moments (GMM) approach. Findings- The results of our study indicate a bidirectional causal relationship between tax avoidance and earnings management in the European context. Contribution- Our research contributes to the existing literature by shedding light on the nuanced relationship between tax avoidance and earnings management in the European context, offering insights that can inform corporate financial strategies and regulatory frameworks.

Suggested Citation

  • Olfa Ben Salah, 2024. "Analyzing the Causal Relationship Between Tax Avoidance and Earnings Management: Evidence from The STOXX Europe 600 Index," Journal of Accounting and Management Information Systems, Faculty of Accounting and Management Information Systems, The Bucharest University of Economic Studies, vol. 23(1), pages 29-49, January.
    • Handle: RePEc:ami:journl:v:23:y:2024:i:1:p:29-49
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    More about this item

    Keywords

    Earnings management; Tax avoidance; Bidirectional causality; Granger-causality;
    All these keywords.

    JEL classification:

    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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