Effect of the Business Cycle on the Relationship Between Accounting Conservatism and Tax Aggressiveness
DOI:
https://doi.org/10.14392/asaa.2024170308Keywords:
Accounting conservatism, Tax agressiveness, Business cycle, BEPSAbstract
Objective: this study analyzed the effect of the business cycle on the relationship between conservatism and tax aggressiveness in companies in the countries that make up the Base Erosion and Profit Shifting (BEPS) steering group.
Research Design: a sample of 73,473 firm-year observations from 21 countries that make up the group was used from 2012 to 2021. These were analyzed using descriptive statistics and multilevel regression (NMR).
Results: among the results, it is highlighted that more conservative companies are less tax aggressive during economic contraction and recession. The relationship is different between the stages of the business cycle. Analyzing the business cycle contributes to the perception that the economic situation the country is going through is relevant to managers' decisions.
Contributions: NMR at the country level allows the results to contribute to researchers minimizing potential biases from differences on economic and cultural scales. The practical contribution have focus on regulators and BEPS objectives. Since 2020, BEPS has been undergoing reformulations in order to take its practices and legislation to less developed countries that do not belong to the group. In view of the results found, it can be seen that precisely this group of countries may benefit from potentially already having less aggressive practices in more conservative companies. For the capital market participants will understanding that the economic scenario also leads to the internal manipulation of accounting information reducing asymmetry and improves the quality of the information used by them.
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