Evaluating the effect of agency costs on permanent and temporary tax differences

Article Type:
Research/Original Article (بدون رتبه معتبر)

Tax payments are one of the major expenses that individuals and companies incur due to their income-generating activities. Creating permanent and temporary tax differences is considered as a risky activity that can bring losses for shareholders. However, the issue of agency and the increase of agency costs in companies increases tax differences. But in the absence of appropriate scientific and experimental evidence in the field of tax differences, the present research has evaluated the effect of agency costs on permanent and temporary tax differences. In this research, four criteria of asset utilization, discretionary expenses, Q Tobin ratio and free cash flow ratio have been used to measure agency costs. In this regard, a sample consisting of 143 companies admitted to the Tehran Stock Exchange during the period of 2015 ti 2021 was selected and tested. Using the multivariate regression method, the results show that among the selected criteria for measuring agency costs, only free cash flow has a significant indirect relationship with permanent tax differences, and the results also show that all four criteria are considered taken to measure the agency costs has a significant relationship with the temporary tax difference that the free cash flow and Q Tobin ratio have an indirect significant relationship and the asset utilization ratio and the ratio of discretionary expenses has a direct and significant relationship with temporary tax differences.

Journal of Public Sector Accounting and Budgeting, Volume:4 Issue: 4, 2024
41 to 59
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