Investigating the Effect of Customer Concentration on Tax Avoidance, Considering Firm's Market Share

Document Type : Research Paper


1 Ph.D Student of Accounting, Dep. of Accounting, Kerman Branch, Islamic Azad University, Kerman, Iran

2 Associate Prof. of Accounting, Faculty of Economics and Management, University of Shahid Bahonar, Kerman, Iran

3 Prof. of Accounting, Faculty of Economics and Management, University of Shahid Bahonar, Kerman, Iran


Objective: The aim of this study is to investigate the effect of customer concentration on tax avoidance considering the firm's market share.
Methods: Tax avoidance measure is the difference between legal and actual tax rates of a company. The sample of this study consists of 79 firms listed in the Tehran Stock Exchange for the period from 2006 to 2015. Data has been examined using regression analysis.
Results: The results indicat that customer concentration had a significant positive impact on the activities of tax avoidance. In addition, positive relationship between customer concentration and tax avoidance is more pronounced when a firm has a lower market share in its industry.
Conclusion: Level of customer concentration affects a firm’s operating performance, cash flow risk, and financial policies, hence one expect that it also affects the extent to which the firm engages in tax avoidance. Corporate customer concentration leads to demand for more cash holdings and less financial volatility. Since tax planning can increase both cash flow and accounting earnings, firms with a concentrated customer base may be more likely to engage in tax avoidance.


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