Tax avoidance and persistence of cash flows: moderating role of firm life cycle
DOI:
https://doi.org/10.21680/2176-9036.2026v18n2ID40496Keywords:
Tax avoidance, persistence of cash flows, firm, life cycleAbstract
Objective: This study aimed to analyze the effect of firm life cycle stages on the relationship between tax avoidance and cash flow persistence in the Brazilian context.
Methodology: A multiple linear regression model estimated by the Ordinary Least Squares (OLS) method was used on a sample of 2,034 observations of non-financial Brazilian companies listed on the stock exchange. The model proposed by Dickinson (2011) was used to analyze the organizational life cycle. Total and Permanent Book-Tax Differences (BTD) were used to measure tax avoidance.
Results: The results suggest that tax avoidance is positively related to cash flow persistence, with the growth stage (maturity and decline) enhancing (attenuating) this relationship. These results highlight that permanent tax strategies are superior to temporary ones in terms of companies' ability to retain cash.
Contributions: The study contributes to the literature by highlighting that temporary and permanent tax reduction strategies present different results in terms of their ability to influence future cash flows. While previous research has documented that temporary differences harm earnings persistence, this study demonstrated that permanent differences favor cash flow persistence. As a practical implication, the research is useful for investors, analysts and other users of accounting information, who can appropriately use information on tax avoidance and life cycle in their company valuation models.
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