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The effects of earnings management and corporate tax avoidance on firm value

Author

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  • Sally M. Yorke
  • Mohammed Amidu
  • Cletus Agyemin-Boateng

Abstract

This paper analyses the implications of earnings management and corporate tax avoidance on the value of firm. Using a sample of non-financial firms listed on the Ghana Stock Exchange over a period of ten years (2003-2012), the study focuses on two pertinent issues: first, it analyses the relationship between earnings management (EM) and corporate tax avoidance (CTA). Second, it empirically tests the effect of the interactions between the two variables on the value of the firm. The results suggest a pervasiveness of EM activities among sampled firms. It further reveals that managers employ avoidance techniques to manage earnings. Our sensitivity analyses suggests that, despite the positive influence of corporate tax avoidance on firm value, the effect is not significant to offset the negative impact of earnings management on firm value, thereby resulting in an overall negative effect on the value of the firm.

Suggested Citation

  • Sally M. Yorke & Mohammed Amidu & Cletus Agyemin-Boateng, 2016. "The effects of earnings management and corporate tax avoidance on firm value," International Journal of Management Practice, Inderscience Enterprises Ltd, vol. 9(2), pages 112-131.
    • Handle: RePEc:ids:ijmpra:v:9:y:2016:i:2:p:112-131
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    Citations

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    Cited by:

    1. Panji Priyanto & Titik Aryati, 2023. "The Effect of Earning Management, Growth Opportunity, and Capital Structure on Company Value with Audit Quality as Moderating Variable," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(1), pages 133-148.
    2. Muljanto Siladjaja & Yuli Anwar & Ismulyana Djan, 2022. "The Relationship between Dividend Policy and Earnings Quality: The Role of Accounting Information in Indonesia’s Capital Market," Economies, MDPI, vol. 10(6), pages 1-23, June.
    3. Deden Tarmidi, 2019. "Tax Compliance and Uncompliance Entity: A Comparative Study of Investor Reaction," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 9(1), pages 105-110, January.

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