This study examines the role of tax avoidance on firm’s earnings management for a sample of 149 listed public firms in Malaysia over 2009 – 2013. Beneish M-score is used to measure the earnings management and effective tax rate to measure the tax avoidance. After controlling firm size, growth, leverage and profitability, the result shows that only two variables which tax avoidance and growth are positively significant towards the earnings management. The result implies that firms may manage their earning to enjoy tax advantages. Moreover, management in growth firms tend engages better earnings performance and thus it may affect the firm investment strategies.
Adhikari, A., Derashid, C., & Zhang, H. (2005). Earnings management to influence tax policy: Evidence from large Malaysian firms. Journal of International Financial Management and Accounting, 16(2), 142-163.
Barton, J., & Simko, P. J. (2002). The balance sheet as an earnings management constraint. The Accounting Review, 77(s-1), 1-27.
Beneish, M. D. (1999). The detection of earnings manipulation. Financial Analysts Journal, 55(5), 24-36.
Denis, D. J., & Denis, D. K. (1993). Managerial discretion, organizational structure, and corporate performance: A study of leveraged recapitalizations. Journal of Accounting and Economics, 16(1), 209-236.
Desai, M. A., & Dharmapala, D. (2006). Corporate tax avoidance and high-powered incentives. Journal of Financial Economics, 79(1), 145-179.
Desai, M. A., & Dharmapala, D. (2009). Earnings management, corporate tax shelters, and book-tax alignment. National Tax Journal, 169-186.
Dyreng, S. D., Hanlon, M., & Maydew, E. L. (2010). The effects of executives on corporate tax avoidance. The Accounting Review, 85(4), 1163-1189.
Gupta, S., & Newberry, K. (1997). Determinants of the variability in corporate effective tax rates: Evidence from longitudinal data. Journal of Accounting and Public Policy, 16(1), 1-34.
Harris, M. N., & Feeny, S. (2000). Habit persistence in effective tax rates: Evidence using Australian tax entities.
Jelinek, K. (2007). The effect of leverage increases on earnings management. Journal of Business and Economic Studies, 13(2), 24-46.
Jones, J. J. (1991). Earnings management during import relief investigations. Journal of Accounting Research, 29(2), 193-228.
Kern, B. B., & Morris, M. H. (1992). Taxes and firm size: the effect of tax legislation during the 1980s. Journal of the American Taxation Association, 14(1), 80-96.
Maloney, M. T., McCormick, R. E., & Mitchell, M. L. (1993). Managerial decision making and capital structure. Journal of Business, 189-217
Maydew, E. L. (1997). Tax-induced earnings management by firms with net operating losses. Journal of Accounting Research, 35(1), 83-96.
Myers, J. N., Myers, L. A., & Skinner, D. J. (2007). Earnings momentum and earnings management. Journal of Accounting, Auditing and Finance, 22(2), 249-284.
Nelson, M. W., Elliott, J. A., & Tarpley, R. L. (2002). Evidence from auditors about managers' and auditors' earnings management decisions. The Accounting Review, 77(s-1), 175-202.
Phillips, J. D. (2003). Corporate tax-planning effectiveness: The role of compensation-based incentives. The Accounting Review, 78(3), 847-874.
Phillips, J., Pincus, M., & Rego, S. O. (2003). Earnings management: New evidence based on deferred tax expense. The Accounting Review, 78(2), 491-521.
Plesko, G. A. (2004). Corporate tax avoidance and the properties of corporate earnings. National Tax Journal, 729-737.
Saleh, N. M., Iskandar, T. M., & Rahmat, M. M. (2005). Earnings management and board characteristics: Evidence from Malaysia. Jurnal Pengurusan, 24, 77-103.
Shevlin, T., & Porter, S. (1992). The corporate tax comeback in 1987: Some further evidence. Journal of the American Taxation Association, 14(1), 58-79.
Stulz, R. (1990). Managerial discretion and optimal financing policies. Journal of Financial Economics, 26(1), 3-27.
Slemrod, J., & Yitzhaki, S. (2002). Tax avoidance, evasion, and administration. In Handbook of public economics (Vol. 3, pp. 1423-1470). Elsevier.
Aumeerun, B., Jugurnath, B., & Soondrum, H. (2016). Tax evasion: Empirical evidence from sub-Saharan Africa. Journal of Accounting and Taxation, 8(7), 70-80.
Marques, M., Rodrigues, L. L., & Craig, R. (2011). Earnings management induced by tax planning: The case of Portuguese private firms. Journal of International Accounting, Auditing and Taxation, 20(2), 83-96.
In-Text Citation: (Razali, Yi, Brahmana, & Tak, 2019)
To Cite this Article: Razali, M. W. M., Yi, P. X., Brahmana, R. K., & Tak, A. H. (2019). Malaysian Listed Firm’s Tax Avoidance: Another Earnings Management Strategy? International Journal of Academic Research in Business and Social Sciences, 9(2), 643–655.
Copyright: © 2019 The Author(s)
Published by Human Resource Management Academic Research Society (www.hrmars.com)
This article is published under the Creative Commons Attribution (CC BY 4.0) license. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this license may be seen at: http://creativecommons.org/licences/by/4.0/legalcode
