Corporate Tax Avoidance and Organizational Capital: The moderating effect of Size and CEO Overconfidence

Document Type : Original Article

Authors

• Hamideh Asnaashari ¹
• Reza Daghani ²
• Morteza Bagheri ³
• Seyed Sadegh Hadian ⁴

¹ Assistant Professor of Accounting, Management and Accounting Faculty, Shahid Beheshti University, Tehran, Iran

² Accounting Department, Management and Accounting college, Allameh Tabatabai University

³ MSC student in Accounting, Management and Accounting Faculty, Shahid Beheshti University, Tehran, Iran

⁴ MSC student in Auditing, Economic and Administrative Science Faculty, Ferdowsi University of Mashhad, Mashhad, Iran

10.22067/ijaaf.2023.84326.1404

Abstract

Taxation is a fundamental mechanism through which governments generate revenue by imposing compulsory levies on earnings and assets. This fiscal landscape is profoundly influenced by the strategic decisions businesses make and their organizational capital (OC) – a distinctive set of strategic assets unique to each firm. OC is closely associated with various performance indicators and productivity benchmarks. This study delves into the intricate relationship between tax avoidance practices and OC within the context of Iran. Additionally, the study scrutinizes the roles of company size and CEO overconfidence in shaping this dynamic. Leveraging a dataset from 2016 to 2021, encompassing 142 companies listed on the Tehran Stock Exchange and employing advanced multivariate regression techniques, our findings unveil a significant and positive association between tax avoidance strategies and OC. Importantly, this relationship holds for both large and small enterprises. It means size does not significantly impact this relationship. Additionally, our investigation uncovers a noteworthy influence of CEO overconfidence on the intricate interplay between tax avoidance and OC. This contribution augments the ongoing discourse surrounding corporate tax avoidance, shedding light on critical dimensions applicable to businesses of varying sizes and magnitudes.

Keywords

• Organizational capital
• tax avoidance
• CEO overconfidence
• company' s size

Main Subjects

• Accounting

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