The Application of Cash Tax Savings in Investment and Dividend Distribution in Selected Persian Gulf Countries

Document Type : Research Paper

Authors

1 Ph.D. Candidate, Department of Accounting, Faculty of Management and Economics, Shahid Bahonar University of Kerman, Kerman, Iran.

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

Abstract

Objective
The activities aimed at avoiding corporate tax payments have drawn considerable attention from lawmakers, international institutions such as the Organisation for Economic Co-operation and Development (OECD), the general media, and academics. These activities involve managers implementing strategies that reduce corporate tax payments through various forms and methods. This research studies the tax cash savings strategy. The purpose of this study is to investigate how companies utilize the cash flows resulting from tax avoidance and whether the presence of women on the board of directors can strengthen the effect of tax avoidance through cash tax savings.
Methods
To achieve this, data was collected from a sample of 119 listed manufacturing companies in selected Persian Gulf countries, including Iran, Qatar, Oman, Kuwait, and Saudi Arabia, during the years 2015-2021. The data was analyzed using a multiple linear regression model with the Pooled Generalized Least Squares (PGLS) method.
Results
The examination of the variables indicates the presence of tax avoidance through the method of tax cash savings among the listed companies on the selected stock exchanges of the chosen countries. Furthermore, the results show that these companies utilize the cash flows generated from tax cash savings through various strategies, such as investment or dividend distribution to shareholders. Contrary to expectations, the presence of women on the board of directors did not demonstrate a significant impact on decision-making. However, it is worth noting that the number of female directors on the board was typically limited to one, which may have influenced the extent of their impact on decision-making.
Conclusion
The results of this study indicate that there is a significant relationship between tax cash savings and investment, meaning that companies utilize the cash flows derived from taxes for investment purposes. There is also a significant relationship between tax cash savings and dividend payments, suggesting that companies allocate a portion of the funds generated from tax cash savings towards distributing dividends to shareholders. Thus, managers choose a combination of asset investment and dividend payments to utilize the cash flows resulting from tax avoidance. The negative coefficient of tax cash savings indicates that companies prefer to use the excess funds generated from tax avoidance for optimal investment purposes. In this regard, the presence of gender diversity on the boards of directors in the countries of this region does not affect the relationship between these two variables. Based on research conducted in other countries, the lack of influence of women on the boards of companies may be due to the relatively low or high number of women, which is typically a result of factors such as culture, governance laws, gender discrimination, and others.

Keywords

Main Subjects

References

 
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Accounting and Auditing Review
Volume 31, Issue 2
2024
Pages 338-368

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