IDEAS home Printed from https://ideas.repec.org/a/ids/injmfa/v14y2022i4p344-361.html
   My bibliography  Save this article

The nexus between aggressive tax planning and earnings management in different political systems and the moderating role of corporate governance

Author

Listed:
  • Soufiene Assidi
  • Omar Al Farooque
  • Khaldoon Albitar

Abstract

This paper explores first the relationship between aggressive tax planning (TP) and earnings management (EM) in European listed companies and then compares this relationship between different political systems. It also examines the moderating role of board governance on aggressive TP and EM relationship. Using panel data of 105 companies listed on the EURONEXT 100 and NEXT 150 for the period 2011 to 2018 and alleviating endogeneity concern, the results show a significant positive relationship between aggressive TP and EM, where firms that tend to use EM practices have lower effective tax rate (ETR). Such relationship is more pronounced in countries with a Presidential system compared to parliamentary/quasi-parliamentary system. Again, board governance variables (i.e. board size and independence) show significantly negative moderating effect, suggesting that board plays an effective role in deterring EM practices by weakening the relationship between ETR and EM. These findings have important policy implications for respective stakeholders.

Suggested Citation

  • Soufiene Assidi & Omar Al Farooque & Khaldoon Albitar, 2022. "The nexus between aggressive tax planning and earnings management in different political systems and the moderating role of corporate governance," International Journal of Managerial and Financial Accounting, Inderscience Enterprises Ltd, vol. 14(4), pages 344-361.
    • Handle: RePEc:ids:injmfa:v:14:y:2022:i:4:p:344-361
    as

    Download full text from publisher

    File URL: http://www.inderscience.com/link.php?id=126559
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ids:injmfa:v:14:y:2022:i:4:p:344-361. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sarah Parker (email available below). General contact details of provider: http://www.inderscience.com/browse/index.php?journalID=252 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.