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- Title
Corporate Governance, Tax Avoidance, and Financial Constraints.
- Authors
Bayar, Onur; Huseynov, Fariz; Sardarli, Sabuhi
- Abstract
Abstract: We examine how corporate governance affects the relationship between corporate tax avoidance and financial constraints. Conditional on having poor governance, tax avoidance is associated with greater financial constraints and a greater likelihood of financial distress. In firms with strong governance, however, we find that tax avoidance does not have a negative impact on financial constraints. Our results suggest that tax avoidance is a less useful source of financing for constrained firms when they are plagued with potential agency problems and opaque information environments. Stronger governance mechanisms can help firms mitigate the negative consequences of tax avoidance.
- Subjects
CORPORATE governance; CORPORATE taxes; TAX planning; INDUSTRIAL management; TAXATION
- Publication
Financial Management (Wiley-Blackwell), 2018, Vol 47, Issue 3, p651
- ISSN
0046-3892
- Publication type
Article
- DOI
10.1111/fima.12208