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Essays on Corporate Governance, and Tax Avoidance: A study of the UK listed Firms / MODAWI FADOUL

Swansea University Author: MODAWI FADOUL

  • E-Thesis – open access under embargo until: 28th January 2027

DOI (Published version): 10.23889/SUthesis.59572

Abstract

This thesis empirically investigates three important topics: corporate governance, CEO managerial incentives, and tax avoidance in the context of FTSE 350 listed firms on London Stock Exchange (LSE). First Topic – Chapter 3 examines the impact of CEO managerial incentives in taking extreme risky dec...

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Published: Swansea 2022
Institution: Swansea University
Degree level: Doctoral
Degree name: Ph.D
Supervisor: Boubaker, Sabri ; Xicheng, Liu
URI: https://cronfa.swan.ac.uk/Record/cronfa59572
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fullrecord <?xml version="1.0"?><rfc1807><datestamp>2022-03-10T13:45:03.0656063</datestamp><bib-version>v2</bib-version><id>59572</id><entry>2022-03-10</entry><title>Essays on Corporate Governance, and Tax Avoidance: A study of the UK listed Firms</title><swanseaauthors><author><sid>bebc0df4b06c9fb604cdddfa9854c2ec</sid><firstname>MODAWI</firstname><surname>FADOUL</surname><name>MODAWI FADOUL</name><active>true</active><ethesisStudent>false</ethesisStudent></author></swanseaauthors><date>2022-03-10</date><abstract>This thesis empirically investigates three important topics: corporate governance, CEO managerial incentives, and tax avoidance in the context of FTSE 350 listed firms on London Stock Exchange (LSE). First Topic &#x2013; Chapter 3 examines the impact of CEO managerial incentives in taking extreme risky decisions and the exploding effects on tax avoidance. Unresolved agency problems relentlessly foster entrenchment and significantly explain greater rent extraction. Our results consistently indicate that higher CEO equity incentives (proxy Vega) is positively and significantly associated with tax avoidance. Findings provide evidence that CEOs play a prominent role in corporate tax decisions and opportunistically set the tone for tax avoidance. We also find that the effect of CEOs' incentives (proxy Delta) is positive and statistically significant. This paper extends the literature about the impact of CEO equity incentives on firm tax avoidance in the context of UK public companies. It further contributes to elucidate on how CEO equity incentives shape firm behaviour, affect corporate short- and long-term investments, and channel important tax loopholes decisions. Standing as the main determinant of corporate tax avoidance, the analysis of CEOs&#x2019; excessive risk-taking behaviour stems as a hot topic, not yet explored in the UK mainstream literature. Second Topic &#x2013; Chapter 4 tests the effect of tax avoidance on firm performance, using a matched sample of UK firms listed on LSE over 1999&#x2013;2019. We document a significant positive relationship between tax avoidance and firm financial performance proxied first by Tobin&#x2019;s Q. We also find that Return on Assets (ROA) exhibits a strong positive relationship with Generally Accepted Accounting Principles Effective Tax Rate (GAAP ETR) but is insignificant with CASH ETR. The significant positive correlation with both performance metrics persists when we account for potential endogeneity concerns using propensity score matching, and first- and two-least-squares approaches. Furthermore, we find that Return on Equity (ROE) is negatively associated with tax avoidance. We thus conclude that the effect is more centric when testing the impact on ROA and Tobin&#x2019;s Q, indicating that UK firms tend to undervalue their ROA to avoid corporation tax. Our results are consistent with the view that firm tax avoidance is a medium to deviate financial resources and to orient them from the state to shareholders.Third Topic &#x2013; Chapter 5 investigates the effect of product market competition on corporate tax avoidance by relying on firm-level data for FTSE 350 listed firms on LSE. Our findings indicate that low competition increases product market competition, which increases firm tax aggressiveness, and leads to more significant tax reductions. Additional analysis shows that the effect of product market competition on tax avoidance is more pronounced for firms with higher exposure to competition, deep financial distress, and weaker governance practices. Centrally, product market competition is negatively affected in the spectrum of poorly governed firms.</abstract><type>E-Thesis</type><journal/><volume/><journalNumber/><paginationStart/><paginationEnd/><publisher/><placeOfPublication>Swansea</placeOfPublication><isbnPrint/><isbnElectronic/><issnPrint/><issnElectronic/><keywords/><publishedDay>28</publishedDay><publishedMonth>1</publishedMonth><publishedYear>2022</publishedYear><publishedDate>2022-01-28</publishedDate><doi>10.23889/SUthesis.59572</doi><url/><notes/><college>COLLEGE NANME</college><CollegeCode>COLLEGE CODE</CollegeCode><institution>Swansea University</institution><supervisor>Boubaker, Sabri ; Xicheng, Liu</supervisor><degreelevel>Doctoral</degreelevel><degreename>Ph.D</degreename><apcterm/><lastEdited>2022-03-10T13:45:03.0656063</lastEdited><Created>2022-03-10T13:34:36.7168467</Created><path><level id="1">Faculty of Humanities and Social Sciences</level><level id="2">School of Management - Accounting and Finance</level></path><authors><author><firstname>MODAWI</firstname><surname>FADOUL</surname><order>1</order></author></authors><documents><document><filename>Under embargo</filename><originalFilename>Under embargo</originalFilename><uploaded>2022-03-10T13:42:34.9788802</uploaded><type>Output</type><contentLength>1671751</contentLength><contentType>application/pdf</contentType><version>E-Thesis &#x2013; open access</version><cronfaStatus>true</cronfaStatus><embargoDate>2027-01-28T00:00:00.0000000</embargoDate><documentNotes>Copyright: The author, Modawi M. 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spelling 2022-03-10T13:45:03.0656063 v2 59572 2022-03-10 Essays on Corporate Governance, and Tax Avoidance: A study of the UK listed Firms bebc0df4b06c9fb604cdddfa9854c2ec MODAWI FADOUL MODAWI FADOUL true false 2022-03-10 This thesis empirically investigates three important topics: corporate governance, CEO managerial incentives, and tax avoidance in the context of FTSE 350 listed firms on London Stock Exchange (LSE). First Topic – Chapter 3 examines the impact of CEO managerial incentives in taking extreme risky decisions and the exploding effects on tax avoidance. Unresolved agency problems relentlessly foster entrenchment and significantly explain greater rent extraction. Our results consistently indicate that higher CEO equity incentives (proxy Vega) is positively and significantly associated with tax avoidance. Findings provide evidence that CEOs play a prominent role in corporate tax decisions and opportunistically set the tone for tax avoidance. We also find that the effect of CEOs' incentives (proxy Delta) is positive and statistically significant. This paper extends the literature about the impact of CEO equity incentives on firm tax avoidance in the context of UK public companies. It further contributes to elucidate on how CEO equity incentives shape firm behaviour, affect corporate short- and long-term investments, and channel important tax loopholes decisions. Standing as the main determinant of corporate tax avoidance, the analysis of CEOs’ excessive risk-taking behaviour stems as a hot topic, not yet explored in the UK mainstream literature. Second Topic – Chapter 4 tests the effect of tax avoidance on firm performance, using a matched sample of UK firms listed on LSE over 1999–2019. We document a significant positive relationship between tax avoidance and firm financial performance proxied first by Tobin’s Q. We also find that Return on Assets (ROA) exhibits a strong positive relationship with Generally Accepted Accounting Principles Effective Tax Rate (GAAP ETR) but is insignificant with CASH ETR. The significant positive correlation with both performance metrics persists when we account for potential endogeneity concerns using propensity score matching, and first- and two-least-squares approaches. Furthermore, we find that Return on Equity (ROE) is negatively associated with tax avoidance. We thus conclude that the effect is more centric when testing the impact on ROA and Tobin’s Q, indicating that UK firms tend to undervalue their ROA to avoid corporation tax. Our results are consistent with the view that firm tax avoidance is a medium to deviate financial resources and to orient them from the state to shareholders.Third Topic – Chapter 5 investigates the effect of product market competition on corporate tax avoidance by relying on firm-level data for FTSE 350 listed firms on LSE. Our findings indicate that low competition increases product market competition, which increases firm tax aggressiveness, and leads to more significant tax reductions. Additional analysis shows that the effect of product market competition on tax avoidance is more pronounced for firms with higher exposure to competition, deep financial distress, and weaker governance practices. Centrally, product market competition is negatively affected in the spectrum of poorly governed firms. E-Thesis Swansea 28 1 2022 2022-01-28 10.23889/SUthesis.59572 COLLEGE NANME COLLEGE CODE Swansea University Boubaker, Sabri ; Xicheng, Liu Doctoral Ph.D 2022-03-10T13:45:03.0656063 2022-03-10T13:34:36.7168467 Faculty of Humanities and Social Sciences School of Management - Accounting and Finance MODAWI FADOUL 1 Under embargo Under embargo 2022-03-10T13:42:34.9788802 Output 1671751 application/pdf E-Thesis – open access true 2027-01-28T00:00:00.0000000 Copyright: The author, Modawi M. Fadoul, 2022. true eng
title Essays on Corporate Governance, and Tax Avoidance: A study of the UK listed Firms
spellingShingle Essays on Corporate Governance, and Tax Avoidance: A study of the UK listed Firms
MODAWI FADOUL
title_short Essays on Corporate Governance, and Tax Avoidance: A study of the UK listed Firms
title_full Essays on Corporate Governance, and Tax Avoidance: A study of the UK listed Firms
title_fullStr Essays on Corporate Governance, and Tax Avoidance: A study of the UK listed Firms
title_full_unstemmed Essays on Corporate Governance, and Tax Avoidance: A study of the UK listed Firms
title_sort Essays on Corporate Governance, and Tax Avoidance: A study of the UK listed Firms
author_id_str_mv bebc0df4b06c9fb604cdddfa9854c2ec
author_id_fullname_str_mv bebc0df4b06c9fb604cdddfa9854c2ec_***_MODAWI FADOUL
author MODAWI FADOUL
author2 MODAWI FADOUL
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institution Swansea University
doi_str_mv 10.23889/SUthesis.59572
college_str Faculty of Humanities and Social Sciences
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hierarchy_top_id facultyofhumanitiesandsocialsciences
hierarchy_top_title Faculty of Humanities and Social Sciences
hierarchy_parent_id facultyofhumanitiesandsocialsciences
hierarchy_parent_title Faculty of Humanities and Social Sciences
department_str School of Management - Accounting and Finance{{{_:::_}}}Faculty of Humanities and Social Sciences{{{_:::_}}}School of Management - Accounting and Finance
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description This thesis empirically investigates three important topics: corporate governance, CEO managerial incentives, and tax avoidance in the context of FTSE 350 listed firms on London Stock Exchange (LSE). First Topic – Chapter 3 examines the impact of CEO managerial incentives in taking extreme risky decisions and the exploding effects on tax avoidance. Unresolved agency problems relentlessly foster entrenchment and significantly explain greater rent extraction. Our results consistently indicate that higher CEO equity incentives (proxy Vega) is positively and significantly associated with tax avoidance. Findings provide evidence that CEOs play a prominent role in corporate tax decisions and opportunistically set the tone for tax avoidance. We also find that the effect of CEOs' incentives (proxy Delta) is positive and statistically significant. This paper extends the literature about the impact of CEO equity incentives on firm tax avoidance in the context of UK public companies. It further contributes to elucidate on how CEO equity incentives shape firm behaviour, affect corporate short- and long-term investments, and channel important tax loopholes decisions. Standing as the main determinant of corporate tax avoidance, the analysis of CEOs’ excessive risk-taking behaviour stems as a hot topic, not yet explored in the UK mainstream literature. Second Topic – Chapter 4 tests the effect of tax avoidance on firm performance, using a matched sample of UK firms listed on LSE over 1999–2019. We document a significant positive relationship between tax avoidance and firm financial performance proxied first by Tobin’s Q. We also find that Return on Assets (ROA) exhibits a strong positive relationship with Generally Accepted Accounting Principles Effective Tax Rate (GAAP ETR) but is insignificant with CASH ETR. The significant positive correlation with both performance metrics persists when we account for potential endogeneity concerns using propensity score matching, and first- and two-least-squares approaches. Furthermore, we find that Return on Equity (ROE) is negatively associated with tax avoidance. We thus conclude that the effect is more centric when testing the impact on ROA and Tobin’s Q, indicating that UK firms tend to undervalue their ROA to avoid corporation tax. Our results are consistent with the view that firm tax avoidance is a medium to deviate financial resources and to orient them from the state to shareholders.Third Topic – Chapter 5 investigates the effect of product market competition on corporate tax avoidance by relying on firm-level data for FTSE 350 listed firms on LSE. Our findings indicate that low competition increases product market competition, which increases firm tax aggressiveness, and leads to more significant tax reductions. Additional analysis shows that the effect of product market competition on tax avoidance is more pronounced for firms with higher exposure to competition, deep financial distress, and weaker governance practices. Centrally, product market competition is negatively affected in the spectrum of poorly governed firms.
published_date 2022-01-28T04:16:59Z
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score 11.012678

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