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Can corporate diversification induce more tax avoidance?

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  • Zheng, Suyan

Abstract

This study investigates whether there is a tax avoidance difference between stand-alone firms and diversified firms. Stand-alone firms are defined as firms that always report only one business segment and diversified firms as firms that report more than one business segment. I show that diversified firms persistently engage in fewer tax avoidance practices than stand-alone firms. This finding cannot be explained by firm characteristics and ownership structure, and is insensitive to alternative testing methods. I interpret the main result as indicating that lower levels of tax avoidance in diversified firms are not primarily altered by corporate diversification, and tax effects are not of first-order importance in corporate diversification.

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  • Zheng, Suyan, 2017. "Can corporate diversification induce more tax avoidance?," Journal of Multinational Financial Management, Elsevier, vol. 41(C), pages 47-60.
    • Handle: RePEc:eee:mulfin:v:41:y:2017:i:c:p:47-60
    DOI: 10.1016/j.mulfin.2017.05.008
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    Cited by:

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    2. Lioara-Veronica Pasc & Camelia-Daniela Hațegan, 2020. "Related Parties’ Transactions: A Literature Overview on Auditor’s Risk," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(2), pages 1021-1030, December.
    3. John Obiora Anyaduba & Ivie Ologhosa Ogbeide, 2022. "Firm Attributes and Corporate Tax Aggressiveness: A Comparative Study of Nigeria and South Africa Banks," Accounting and Finance Research, Sciedu Press, vol. 11(2), pages 1-18, May.
    4. Dorra Ellouze & Khadija Mnasri, 2020. "Business group diversification, financial constraints and firm performance: the case of Tunisian group affiliated firms," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 24(1), pages 273-301, March.
    5. Kayani, Umar Nawaz & Arif, Muhammad & Hoang, Khanh, 2021. "Chairman age and corporate diversification: The cases of old and powerful captains in Chinese firms," Journal of Behavioral and Experimental Finance, Elsevier, vol. 31(C).
    6. Hoang, Khanh & Nguyen, Cuong & Zhang, Hailiang, 2021. "How does economic policy uncertainty affect corporate diversification?," International Review of Economics & Finance, Elsevier, vol. 72(C), pages 254-269.

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    More about this item

    Keywords

    G31; M14; H26; Corporate Diversification; Tax Avoidance; Transfer Pricing; Ownership Structure;
    All these keywords.

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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