Corporate financial distress and tax avoidance: Evidence from Tehran Stock Exchange

Firms have the incentive to engage in corporate tax avoidance when the marginal benefits exceed the marginal costs. In fact, when firms are under financial distress, the benefits of tax avoidance outweigh the costs, increasing the incentive to avoid tax. The main objective of this study was to the corporate financial distress and tax avoidance in companies listed in the Tehran Stock Exchange. This study is an applied research in terms of its objectives and a correlation research concerning its nature. The research population consisted of companies that were working in the Tehran Stock Exchange from 2009 to 2018. However, due to some restrictions, 87 companies were selected and included in the research sample. To test the research model, the panel method with fixed effects was employed. The results of this study showed that there is a significant relationship between corporate financial distress (bankruptcy risk) and tax avoidance, and the global financial distress has had a positive significant impact on this relationship. Therefore, governments are recommended to take into account the insights from this study when planning and making policies and try to lower the vulnerability of companies and all natural and legal entities associated with them.

global financial distress”. risk of bankruptcy”. tax avoidance”. Tehran Stock Exchange