Correlation between tax holidays and earnings management: An empirical study

Zinatul Ashiqin Bachek, Norsiah Ahmad, Norman Mohd Saleh

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

This study investigates tax avoidance activities among tax-exempt Malaysian companies. Pioneer status companies enjoy up to 100 percent tax exemption on their statutory income for promoting certain activities or producing certain products. In this context, we explore the tendency of companies to manage earnings by shifting income through certain periods and thereby minimizing tax liabilities. Following the literature, discretionary current accruals are used as proxy for earnings management. A control sample is introduced to identify abnormal accruals induced by the pioneer status of companies. Multiple regression analysis indicates that companies manage their earnings to minimize their tax burden. Specifically, pioneer status companies in Malaysia accelerate revenues to the year prior to the expiration of their tax exemptions to reduce tax liabilities in subsequent years.

Original languageEnglish
Pages (from-to)55-64
Number of pages10
JournalJurnal Pengurusan
Volume34
Publication statusPublished - Jun 2012

Fingerprint

Earnings management
Empirical study
Holidays
Tax
Pioneers
Liability
Tax exemption
Income
Multiple regression analysis
Tax avoidance
Accruals
Abnormal accruals
Revenue
Income shifting
Malaysia
Tax burden

ASJC Scopus subject areas

  • Business, Management and Accounting (miscellaneous)
  • Accounting
  • Business and International Management

Cite this

Correlation between tax holidays and earnings management : An empirical study. / Bachek, Zinatul Ashiqin; Ahmad, Norsiah; Mohd Saleh, Norman.

In: Jurnal Pengurusan, Vol. 34, 06.2012, p. 55-64.

Research output: Contribution to journalArticle

Bachek, Zinatul Ashiqin ; Ahmad, Norsiah ; Mohd Saleh, Norman. / Correlation between tax holidays and earnings management : An empirical study. In: Jurnal Pengurusan. 2012 ; Vol. 34. pp. 55-64.
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