Investigate The Relationship Between The Tax Avoidance And Earnings Management And Stock Price Crash Risk By Emphasizing Role Of Powerful CEOs The Tax Avoidance And Earnings Management.

Ghaznavi, Reza; Vaghfi, Seyed Hesam; Ghaznavi, Mehrdad

Investigate The Relationship Between The Tax Avoidance And Earnings Management And Stock Price Crash Risk By Emphasizing Role Of Powerful CEOs The Tax Avoidance And Earnings Management.

Document Type : Original Article

Authors

reza ghaznavi ¹

seyed hesam vaghfi ²

mehrdad ghaznavi ³

¹ MSc. Stu

² Department of Management, Economics and Accounting, Payame Noor University, I.R. of Iran

³ Associate Prof., Faculty of Economic and Political Sciences, Shahid Beheshti University, Tehran, Iran

Abstract

The CEO’s power allows effective controlling of the information available to other board members and preventing effective supervision on the CEO himself. In these conditions, if the interests of the CEO are not consistent with the interests of the shareholders, undesirable effects such as earnings management will appear and the interests of shareholders will be compromised. On the other hand, in companies typically managers are looking for their own interests, and as long as the additional benefits resulted from reducing probable debts are higher than the additional costs expected by them, they seek to reduce tax liabilities and increase tax avoidance.This study examines Investigate The Relationship Between The Tax Avoidance And Earnings Management And Stock Price Crash Risk By Emphasizing Role Of Powerful CEOs The Tax Avoidance And Earnings Management.
The population of this research is the companies listed in the Tehran Stock Exchange during the years 2011 to 2015 (a five-year period). The results show that the power of the company CEO has significant impact on the relationship between tax avoidance and Stock Price Crash Risk. This suggests that strong CEO is self-motivated and utilizes company's resources for his own interests and has a negative impact on the value and profitability of the company. The results also showed that the proportion of non-executive CEO also has a positive and significant effect on the Stock Price Crash Risk.

Keywords

stock price crash risk

CEO power

tax avoidance

earnings management