Publication: Tax avoidance and the cost of debt for SMEs: Evidence from Spain
Authors
Sánchez Ballesta, Juan Pedro ; Yagüe, José
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Facultades, Departamentos, Servicios y Escuelas::Departamentos de la UMU::Organización de Empresas y Finanzas
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Publisher
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DOI
https://doi.org/10.1016/j.jcae.2023.100362
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info:eu-repo/semantics/article
Description
©2023. This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/
This document is the Published version of a Published Work that appeared in final form in Journal of Contemporary Accounting and Economics. To access the final edited and published work see https://doi.org/10.1016/j.jcae.2023.100362
Abstract
We investigate the effect of tax avoidance on the cost of debt for SMEs. Tax avoidance
may increase a firm’s cash flows on one hand, but also increase the agency costs, the
information risk, and the risk of scrutiny by tax authorities on the other, affecting the cost
of debt in opposing ways. Using a sample of Spanish SMEs for the period 2007-2019,
our findings show that tax-avoiding SMEs face lower debt costs, suggesting that the
positive effects of tax avoidance prevail over the negative ones for SMEs. This finding is
consistent with a more favourable assessment of SMEs’ tax avoidance activities by their
key finance providers (banks), given SME unique characteristics and their lower agency
costs.
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Citation
Journal of Contemporary Accounting and Economics
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