Corporate tax avoidance and stock price crash risk: The moderating role of audit quality
Date Published:
25/03/2026
Online Published:
25/03/2026
Section:
Business Administration, Marketing, Commerce, and Tourism
Main Article Content
Abstract
Drawing on agency theory, this study aims to examine the moderating effect of audit quality on the relationship between corporate tax avoidance and stock price crash risk. Using panel data of 140 firms listed on HOSE and HNX from 2017 to 2024, and addressing endogeneity issues through GMM, the results reveal that audit quality shows a significant moderating effect on the relationship between corporate tax avoidance and stock price crash risk. These results highlight that tax avoidance provides an opportunity for managers to conceal bad information, which may accumulate and trigger stock price collapses, while audit quality mitigates such concealment behavior by the managers, promotes more transparent information disclosure and thereby reduces the stock price crash risk. The study contributes to the literature by showing evidence of these relationships from an emerging market and highlights important implications. Investors should incorporate tax avoidance indicators and also the audit quality of corporates into risk assessments, while policymakers are encouraged to strengthen tax enforcement, enhance disclosure requirements and promote improvements in external audit firms to enhance stock price market transparency and stability.
Keywords
Audit quality; Corporate tax avoidance; Emerging market; Stock price crash risk
Article Details
Field of Economic (JEL Codes)
G32 - Financing Policy • Financial Risk and Risk Management • Capital and Ownership Structure • Value of Firms • Goodwill - Corporate Finance and Governance, H25 - Business Taxes and Subsidies - Taxation, Subsidies, and Revenue, M42 - Auditing - Accounting and Auditing
References
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Bakhiet, B. S. A. (2024). Does audit quality moderate the relationship between financial statements readability and stock price crash risk? Journal of Financial Reporting & Accounting. https://doi.org/10.1108/jfra-10-2023-0581
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Chafai, A., Khémiri, W., Tobar, R., Attia, E. F., & Abozeid, H. O. (2024). The moderating effect of audit quality on the relationship between financial inclusion and corporate investment: new evidence from the Middle East and North Africa region. Cogent Economics & Finance, 12(1). https://doi.org/10.1080/23322039.2024.2378121
Chang, X., Chen, Y., & Zolotoy, L. (2017). Stock liquidity and stock price crash risk. Journal of Financial and Quantitative Analysis, 52(4), 1605–1637. https://doi.org/10.1017/s0022109017000473
Chang, X., Dasgupta, S., & Hilary, G. (2009). The effect of auditor quality on financing decisions. The Accounting Review, 84(4), 1085–1117. https://doi.org/10.2308/accr.2009.84.4.1085
Chen, H., Chen, J. Z., Lobo, G. J., & Wang, Y. (2011). Effects of Audit Quality on Earnings Management and Cost of Equity Capital: Evidence from China. Contemporary Accounting Research, 28(3), 892–925. https://doi.org/10.1111/j.1911-3846.2011.01088.x
Chen, J., Hong, H., & Stein, J. C. (2001). Forecasting crashes: trading volume, past returns, and conditional skewness in stock prices. Journal of Financial Economics, 61(3), 345–381. https://doi.org/10.1016/s0304-405x(01)00066-6
Chen, K.-P., & Chu, C. C. (2005). Internal Control versus External Manipulation: A Model of Corporate Income Tax Evasion. The RAND Journal of Economics, 36(1), 151–164. https://econpapers.repec.org/article/rjerandje/v_3a36_3ay_3a2005_3a1_3ap_3a151-164.htm
Chen, S., Ye, Y., & Jebran, K. (2022). Tax enforcement efforts and stock price crash risk: Evidence from China. Journal of International Financial Management and Accounting, 33(2), 193–218. https://doi.org/10.1111/jifm.12145
Chen, X., Hu, N., Wang, X., & Tang, X. (2014). Tax avoidance and firm value: evidence from China. Nankai Business Review International, 5(1), 25–42. https://doi.org/10.1108/nbri-10-2013-0037
Crocker, K. J., & Slemrod, J. (2005). Corporate tax evasion with agency costs. Journal of Public Economics, 89(9–10), 1593–1610. https://doi.org/10.1016/j.jpubeco.2004.08.003
Dang, V. C., & Nguyen, Q. K. (2024). Internal corporate governance and stock price crash risk: evidence from Vietnam. Journal of Sustainable Finance & Investment, 14(1), 24–41. https://doi.org/10.1080/20430795.2021.2006128
Darmawan, A. (2023). Audit quality and its impact on financial reporting transparency. Golden Ratio of Auditing Research, 3(1), 32–45. https://doi.org/10.52970/grar.v3i1.375
DeAngelo, L. E. (1981). Auditor size and audit quality. Journal of Accounting and Economics, 3(3), 183–199. https://doi.org/10.1016/0165-4101(81)90002-1
Desai, M. A., & Dharmapala, D. (2006). Corporate tax avoidance and high-powered incentives. Journal of Financial Economics, 79(1), 145–179. https://doi.org/10.1016/j.jfineco.2005.02.002
Desai, M. A., & Dharmapala, D. (2009). Corporate tax avoidance and firm value. The Review of Economics and Statistics, 91(3), 537–546. https://doi.org/10.1162/rest.91.3.537
Dong, T., Tylaite, M., & Wilson, R. (2022). Voluntary vs. mandatory: the role of auditing in constraining corporate tax avoidance in small private firms. Accounting and Business Research, 53(7), 723–755. https://doi.org/10.1080/00014788.2022.2063105
Donohoe, M. P., & Knechel, W. R. (2014). Does corporate tax aggressiveness influence audit pricing? Contemporary Accounting Research, 31(1), 284–308. https://doi.org/10.1111/1911-3846.12027
Dyreng, S. D., Hanlon, M., & Maydew, E. L. (2008). Long-Run corporate tax avoidance. The Accounting Review, 83(1), 61–82. https://doi.org/10.2308/accr.2008.83.1.61
El-Deeb, M. S., Alarabi, Y., & Mohamed, A. (2024). The role of audit committee characteristics in improving the risk disclosure of companies examining the moderating role of audit quality. Future Business Journal, 10(1). https://doi.org/10.1186/s43093-024-00417-2
Emmanuel, O. N. B., Thierry, M. A., Christian, A. Z. C., & Ludé, D. (2024). What drives financial market growth in Africa? International Review of Financial Analysis, 91, 102990. https://doi.org/10.1016/j.irfa.2023.102990
Feng, H., Habib, A., Huang, H. J., & Qi, B. (2021). Auditor industry specialization and stock price crash risk: individual-level evidence. Asia-Pacific Journal of Accounting & Economics, 28(4), 427–453. https://doi.org/10.1080/16081625.2019.1584859
Francis, B. B., Hasan, I., & Li, L. (2016). Abnormal real operations, real earnings management, and subsequent crashes in stock prices. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.2769812
Francis, J. R. (2004). What do we know about audit quality? The British Accounting Review, 36(4), 345–368. https://doi.org/10.1016/j.bar.2004.09.003
Gaaya, S., Lakhal, N., & Lakhal, F. (2017). Does family ownership reduce corporate tax avoidance? The moderating effect of audit quality. Managerial Auditing Journal, 32(7), 731–744. https://doi.org/10.1108/maj-02-2017-1530
Garg, M., Khedmati, M., Meng, F., & Thoradeniya, P. (2020). Tax avoidance and stock price crash risk: mitigating role of managerial ability. International Journal of Managerial Finance, 18(1), 1–27. https://doi.org/10.1108/ijmf-03-2020-0103
Graham, J. R., & Tucker, A. L. (2006). Tax shelters and corporate debt policy. Journal of Financial Economics, 81(3), 563–594. https://doi.org/10.1016/j.jfineco.2005.09.002
Gribnau, H. (2015). Corporate social responsibility and tax planning. Social & Legal Studies, 24(2), 225–250. https://doi.org/10.1177/0964663915575053
Gul, F. A., Fung, S., & Jaggi, B. (2009). Earnings quality: Some evidence on the role of auditor tenure and auditors’ industry expertise. Journal of Accounting and Economics, 47(3), 265–287. https://doi.org/10.1016/j.jacceco.2009.03.001
Habib, A., & Hasan, M. M. (2017). Managerial ability, investment efficiency and stock price crash risk. Research in International Business and Finance, 42, 262–274. https://doi.org/10.1016/j.ribaf.2017.07.048
Habib, A., Hasan, M. M., & Jiang, H. (2018). Stock price crash risk: review of the empirical literature. Accounting and Finance, 58(S1), 211–251. https://doi.org/10.1111/acfi.12278
Han, X., Luo, W., Wu, L., & Zhou, W. (2023). Audit effort and stock price crash risk. Abacus, 59(1), 230–257. https://doi.org/10.1111/abac.12281
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How to Cite
Luu , N. B., Le , H. N., Mai , T. P. N., & Truong, P. (2026). Corporate tax avoidance and stock price crash risk: The moderating role of audit quality. Journal of Finance - Marketing Research, 4(2ene), 89-103. https://doi.org/10.52932/jfmr.v4i2ene.1156