Country corruption and abnormal book-tax differences: a multilevel analysis
DOI:
https://doi.org/10.11606/issn.1982-6486.rco.2022.188514Keywords:
Abnormal book-tax differences, Perceived corruption, Profit quality, IFRSAbstract
This study seeks to investigate whether perceived corruption, which is characteristic of the institutional environment of many countries, is related to abnormal book-tax differences (ABTDs) for publicly held firms around the world. We have applied multilevel modeling to 170,543 observations for 99 countries from 2012 to 2018. Our research hypothesis proposes a positive association between ABTDs and countries' perceived corruption, and it was not rejected for the total sample and countries which have adopted the International Financial Reporting Standards (IFRS). These results suggest that in countries which have adopted the IFRS, managers are opportunistically using the greater flexibility resulting from the internationalization of accounting standards to practice corruption, and this may also possibly be influenced by the poor local institutional environment in terms of fighting corruption. This study contributes to the literature by offering new perspectives on how the business environment is affected by country characteristics, and employs multilevel modeling, which is the most accurate technique for samples with grouped structures.
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