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The association between competition power in markets and tax avoidance: evidence from Tehran stock exchange

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  • Behnam Karamshahi

    (Shahid Bahonar University of Kerman)

  • Zeinab Azami

    (Shahid Bahonar University of Kerman)

  • Tabandeh Salehi

    (Shahid Bahonar University of Kerman)

Abstract

The current research aimed at studying the association between the power of competition in markets and tax avoidance in the companies complied with Tehran stock exchange. To evaluate competition power in the markets, 2 variables are used, namely, Herfindahl-Hirschman Index (HHI) and entrance obstacles. The dependent variables in this paper were effective tax rate (ETR) and adjusted non-taxable income. The research sample included 72 companies listed on Tehran Stock Exchange during 2006–2015. To assess the research hypotheses, a multi-variable regression was utilized. The research findings revealed a negative relationship between HHI and the ratio of entrance obstacles on the one hand and ETR on the other hand. Thus, the higher the power of competition in a company was, the more the tax avoidance was found. Also, a significant association was observed between HHI and the adjusted non-taxable income. Finally, no significant relationship was seen between the entrance obstacles and adjusted non-taxable incomes.

Suggested Citation

  • Behnam Karamshahi & Zeinab Azami & Tabandeh Salehi, 2018. "The association between competition power in markets and tax avoidance: evidence from Tehran stock exchange," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 8(3), pages 323-339, September.
    • Handle: RePEc:spr:eurasi:v:8:y:2018:i:3:d:10.1007_s40821-017-0082-8
    DOI: 10.1007/s40821-017-0082-8
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