Purpose In global economies, taxation is one of the most significant sources of government revenue aimed at optimal resource allocation, playing a key role in countries' economic growth. Therefore, the primary objective of this study is to investigate the mutual effects of tone management and corporate tax avoidance. Managers can manipulate the tone of information disclosed in corporate reports through biased word selection, reducing the effectiveness of the information provided. Design/methodology/approach This research utilizes 1,298 observations from 118 companies listed on the Tehran Stock Exchange, covering 2012 to 2022. A simultaneous equations system approach was used for data analysis. Findings According to the results of the simultaneous equations system, tax avoidance negatively and significantly impacts the management of the qualitative disclosure tone. Conversely, tone management negatively and significantly impacts corporate tax avoidance. Additionally, audit quality acts as a moderator that can adjust the impact of tone management on corporate tax avoidance. However, audit quality cannot moderate the effect of tax avoidance on the abnormal tone of board reports. Moreover, supplementary analyses and robustness checks showed that the research findings are not sensitive to alternative operational definitions of tax avoidance. Finally, abnormal historical and industry tones also positively and significantly impact corporate tax avoidance. Originality/value Furthermore, the analysis of qualitative disclosures as a complementary tool for detecting tax avoidance paves the way for future research that combines textual information with traditional financial data.
yekebaghi et al. (Wed,) studied this question.
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