Analyzing the Relationship between Cash Holdings, Corporate Social Responsibility and Tax Avoidance and its Impact on Firm’s Value: Evidences from the Egyptian Business Environment
Dr / Magdy Melegy Abdul Hakim Melegy
Assistant Professor, Department of Accounting
Faculty of Commerce, Benha University
Abstract:
Purpose: to analyze the relationship between cash holdings, Corporate Social Responsibility Disclosure and Tax avoidance and the impact of this relation on the firm’s value; besides the impact of corporate governance mechanisms’ quality on these relationships.
Design and Methodology The study adopted the content analysis method in examining the annual reports of a sample of (140) non-financial companies listed in the Egyptian Stock Exchange during the period from 2015 to 2017, with a total of (420) observation, to test the research four hypotheses that reflect the relationship between cash holdings, corporate social responsibility disclosure, tax avoidance and the quality of corporate governance mechanisms from one side, and the impact of cash holdings on the firms’ value from the other side. The multiple regression method was adopted to test the research hypotheses using the SPSS program.
Findings: The results of this study indicate that the level of cash reserves held by the Egyptian firms under study has decreased reaching 17% in 2017. It also has a positive significant relationship with both corporate social responsibility disclosure and tax avoidance, and with a negative significant relationship with Tobin’s Q value as a measurement of firm’s market value, and the rate of return on assets as an accounting measure of value.
The study recommends that Egyptian firms try to balance between the benefits of cash retention and the associated costs to achieve the optimum level of cash reserves, and to increase the disclosures in the reports of social responsibility. It also recommends the application of good governance mechanisms, and that the Bodies responsible for issuing accounting standards and tax laws to limit tax avoidance opportunities. It also called for enhancing the investment climate and providing political stability to reduce the accumulation of cash reserves.
Originality/Value: This study attempts to reduce the research gap in the accounting literature by analyzing in an integrated manner the non-traditional factors affecting the firms’ monetary policy. It also provides evidences from the Egyptian business environment about the impact of cash holdings on the firms’ value, it also provides useful information for investors, accounting standards boards and controlling authorities to help them in monitoring the efficiency of monetary resources usage, level of corporate social responsibility disclosure, and tax avoidance activities.
Keywords:
Cash holdings; corporate social responsibility disclosure; tax avoidance; corporate governance mechanisms quality; Firms’ value.
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