Title: Tax benefits determinants and earnings management: results from the eurozone countries

Authors: Panagiotis Tachinakis

Addresses: Department of Accounting and Finance, School of Business Administration, University of Macedonia, Egnatia 156, Thessaloniki 546 36, Greece

Abstract: Previous evidence indicates that there are considerable benefits for firms operating in tax havens, defined as countries that provide tax benefits to attract foreign capital. Using a sample of Eurozone countries along with tax haven country rankings, we examine how firms adjust their level of earnings management in response to some countries' tax benefits. We also explore whether and to what extent countries' different tax characteristics influence the relationship between earnings management and the existence of tax benefits. Our findings indicate that firms domiciled in countries with lower tax rates have lower levels of earnings management than companies domiciled in other European countries. However, countries with higher tax contribution rates and higher tax haven scores have lower earnings management scores. Our results suggest that firms domiciled in tax havens have interests other than just the low tax rates. In fact, the more flexible regulatory environment in these countries is a key feature that attracts firms to tax havens.

Keywords: earnings management; tax havens; tax revenue.

DOI: 10.1504/IJCEE.2022.122831

International Journal of Computational Economics and Econometrics, 2022 Vol.12 No.3, pp.263 - 274

Received: 03 Aug 2020
Accepted: 20 Oct 2020
Published online: 13 May 2022 *

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