Relationship Between Ownership Structure and Financial Performance on Corporate Tax Policy Investigation: Evidences from Firms Listed on Tehran Stock Exchange

Document Type : Research Paper


Department of Accounting, Faculty of Management< University of Tehran, Tehran, Iran


Organizational factors affect organizational reporting and performance as well. Tax policy making has been a challenging issue for stock holders. Different types of ownership call for different reporting Policy. Therefore, firms with institutional owners along with firms in presence of governmental owners are in different position of tax planning. There are two types of tax policy over the literature, aggressive policy and conservative policy. In this research impact of ownership structure and firm performance on tax policy making is going to be studied.
The aim of the study is to examine the effects of ownership structure and firm performance on tax planning among Iranian public listed firms. Hence based on the literature, the hypotheses are developed as follows:
H1. Ownership structure affects tax policy in Iranian public listed firms.
H1 a. institutional ownership affects tax policy in Iranian public listed firms.
H1 b. Governmental ownership affects tax policy in Iranian public listed firms.
H2. Firm performance affects tax policy in Iranian public listed firms.
H2 a. Sale growth affects tax policy in Iranian public listed firms.
H2 b. Return on assets affects tax policy in Iranian public listed firms.
All the firms listed on Tehran Stock Exchange (TSE) over 2010 to 2014 are statistical population in this research. Sample was selected based on the following criteria:
-   Firm should be accepted on TSE before ending 2009.
-   Fiscal year ends on March 20 every year.
-   Research data of the firm is available.
-   Firm is not listed as financial institutes.
Based on the above criteria 137 firms i.e. 685 firm-year was selected. Data was gathered from financial statements or other types of firms’ disclosure. Research type is correlation and research data regression model is used for analysis.
Results show a meaningful relation between the presence of governmental and institutional owners and tax policy. This relation is positive for institutional owners while it is negative for those of governmental owners. In other word, governmental owners push the firm to have more aggressive tax policy. Thus, the more the governmental owners a firm has, the more aggressive tax policy it will make. Firm performance and financial leverage has no relation i.e. on tax policy making.
This research studied the relationship between ownership structure and firm performance with tax policy making among public listed firms on TSE. Results illustrates that firms with more institutional and governmental ownership try to reduce their taxes using an aggressive tax policy. This may ruin economic transparency and call the government to plan for better privatization program. Other findings illustrate better firm performance has no meaningful relation with firms’ tax policy making. Other findings indicate large firms make more aggressive tax policies.


Dhaliwal, D. S., Lee, H., Pincus, M.  & Steele, L. B. (2). Taxable income and firm risk. The Journal of The American Taxation Association, 39(1) 1-24.
Abdoli, M., Bakhshi, H.&  Hoseini, S. (2013). Investigating firms' aggressive reporting and firm size with aggressive tax policy. Journal of Tax Research (in Persian),21(19), 157-170.
Ahadian, F. (2000). Investigating the Book Tax Difference. Tehran: Master Thesis in University of Tehran. (in Persian).
Armstrong, C., Jennifer, B. L. & Larcker, D. F. (2012). The incentives for tax planning. Journal of Accounting and Economics. 53(1), 391-411.
Badertscher, B. A., Katz, S. P. & Rego, S. O. (2013). The separation of ownership and control and corporate tax avoidance. Journal of Accounting and Economics. 56(3), 228-250.
Berle, A. & Means, G. (1998). The Modern Corporation and Private Property (Rev. Edition). New York: Harcourt Brace and World.
Bradshaw, M., Liao, G. &  Ma, M. (2012). State Ownership, Tax and Political Promotion: Evidence from China. Chicago: SSRN Working Paper.
Chen, C. & Lai, S. (2012). Financial Constraint and Tax Aggressiveness. Hong Kong: University of Auckland and Chinese University of Hong Kong.
Chen, S., Chen, X., Cheng, Q. & Shevlin, T. (2010). Are family firms more tax aggressive than non-family firms?  Journal of Financial Economics. 95(1), 41-61.
Cloyd, C., Pratt, J.&  Stock, T. (1996). The use of financial accounting choice to support aggressive tax positions: Public and private firms. Journal of Accounting Research. 34(1), 23-43.
Davis, A., Moore, R.&  Rupert, T. (2017). The effect of tax expense management and CSR ratings on investor perceptions of firm value and CSR performance. Social Science Research Network. 1-43.
Etemadi, H., Mohammadi, A. & Nazemi Ardekani, M. (2009). The Relationship Between Auditor Industry Special and Earning Quality of Public Listed Firms on Tehran Stock Exchange. Financial Accounting Research, (in Persian), (1 & 2), 17-32.
Faccio, M. (2010). Differences between politically connected and non-connected firms: A cross country analysis. Financial Management, 39(3), 905-928.
Foremny, D. & Riedel, N. (2014). Business taxes and the electoral cycle. Journal of Public Economics. 115(7), 48-61.
Guenther, D. A., Matsunaga, S. R. & Williams, B. M. (2013). Tax Avoidance, Tax Aggressiveness, Tax Risk and Firm Risk. University of Oregon, Eugene. Lundquist College of Business.
Hasseldin, J. & Morris, G. (2012). Corporate social responsibility and tax avoidance: A comment and reflection. Accounting Forum, 37(1), 242-256.
Hunt, H. (1985). Potential determinants of corporate inventory accounting decisions. Journal of Accounting Research, 23(2). 448-467.
Jensen, M. C. & Mecling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and capital structure. Journal of Financial Economics, 3(4). 305-365.
Jian, M., Li, W. & Zhang, H. (2012). How Does State Ownership Affect Tax Avoidance? Evidence from China. Singapore: Working Paper, Singapore Management University.
Kelly, L. (1983). The development of a positive theory of corporate management’s role in external financial reporting. Journal of Accounting Literature, 10(2), 111-150.
Khajavi, S. & Kiamehr, M. (2015).  Investigating the relationship between audit quality and tax avoidance among public listed on tehran stock exchange. Journal of Tax Research, 23 (2). 87-108. (in Persian).
Kim, C. & Zhang, L. (2016). Corporate political connections and tax aggressiveness. Contemporary Accounting Research 33(1). 78-114.
Kordestani, G. & Masoumi, J. (2009). Challenges of corporate governance in emerging economics. Audit Science, 37. 40-46. (in Persian).
Mani, K., Pazhouyan, J. & Mohammadi, T. (2011). Investigating the effect of taxes on the relationship between financial markets and economic growth. Journal of Economic Research, 11(3). 13-37. (in Persian).
McGuire, J. B., Sundgren, A. & Schneeweis, T. (1988). Corporate Social Responsibility and Firm Financial Performance. Academy of Management Journal. 31(4). 854-872.
Mehrani, S. & Seyyedi, S. (2014). Investigating the impact of income tax and conservative accounting on firms' tax avoidance. Journal of Accounting and Auditing Knowledge, 10(3). 13-23. (in Persian).
Mehrani, S., Karami, G., Moradi, M. & Eskandar, H. (2010). Investigating the relationship between institutional investors and the quality of financial reporting. Journal of Advances in Accounting, 1(2). 227-249. (in Persian).
Mills, L. (1998). Book-tax differences and Internal Revenue Service adjustments. Journal of Accounting Research. 36(2). 343-356.
Namazi, M. (2010). Empiricat Research in Accounting: Methodology Perspective (2nd Edition). Shiraz: University of Shiraz. (in Persian).
Niehaus, G. (1989). Ownership structure and inventory method choice. The Accounting Review, 64 (2), 184-269.
Rahmani, A., Mashayekh, S. & PourA'zam, M. (2011). Impact of Ownership Structure on Firms Performance. Quarterly Journal of Financial Accounting and Auditing Research, 9 (3). 1-22. (in Persian).
Richardson, G., Taylor, G. & Lanis, R. (2015). The impact of financial distress on corporate tax avoidance spanning the global financial crisis: Evidence from Australia. Economic Modelling, 44(3), 44-53.
Saeedi, A. & Shiri Ghohi, A. (2012). Ownership Structure and Firm Performance: Evidences From Tehran Stock Exchange. Journal of Stock Exchange (in Persian) 18 (5), 153-172.
Salihu, I. A., Annuar, H. A. & Sheikh Obid, S. N. (2013). Ownership structure and corporate tax aggressiveness: A conceptual approach. International Accounting and Business Conference, (Kuala Lumpur: IABC) 1-23.
Scholz, J. & Lubell, M. (1998). Trust and taxpaying: testing the heuristic approach to collective action. American Journal of Political Science,  42 (2), 398-417.
Setayesh, M., Rezaei, G. & Hoseyni Rad, S. (2014). Investigating the role of owneship structure on cash management and inventories in firms listed on tehran stock exchange. Journal of Advances in Accounting, 6 (1), 29-62. (in Persian).
Shackelford, D. & Shevlin, T. (2001). Empirical tax research in accounting. Journal of Accounting and Economics, 31(3), 321-387.
Taylor, G. & Richardson, G. (2014). Incentives for corporate tax planning and reporting: Empirical evidence from Australia. Journal of Contemporary Accounting & Economics, 10(1), 1-15.
Watts, R. & Zimmerman, J. (1986). Positive Accounting Theory. London: Prentice-Hall.
Watts, R. L. & Zimmerman, J. L. (1978). Towards a positive theory of the determination of accounting standards. The Accounting Review, 53 (1) 112-134.
Welch, E. (2003). The relationship between ownership structure and performance in listed australian companies. Australian Journal of Management, 28 (3), 287-305.
Wu, L. S., Wang, Y. P., Gills, P. & Lou, W. (2012). State ownership, tax status and size effect of effective tax rate in China. Accounting and Business Research, 42(2), 97-114.
Wu, W., Rui, O. & Wu, C. (2013). Institutional environment, ownership and firm taxation: Evidence from China. Economics of Transition, 51 (1), 17-51.
Ying, T., Wright, B. & Huang, W. (2016). Ownership structure and tax aggressiveness of chinese listed companies. International Journal of Accounting & Information Management, 25 (3), 313-332.
Yu, M. (2013). State ownership and firm performance: Empirical evidence from Chinese listed companies. China Journal of Accounting Research, 6(2), 75-87.
Zeng, T. (2010). Ownership concentration, state ownership, and effective tax rates: Evidence from china’s listed firms. Accounting Perspectives, 9 (4), 271-289.
Zhang, H. (2012). How Does State Ownership Affect Tax Avoidance? Evidence From China. Singapore: School of Accountancy Singapore Management University.
Zimmerman, J. L (1983). Taxes and firm size. Journal of Accounting and Economics, 5(1), 119-149.
  • Receive Date: 04 September 2017
  • Revise Date: 06 March 2018
  • Accept Date: 09 May 2018
  • First Publish Date: 21 January 2019