THE IMPACT OF TAX AVOIDANCE ON THE COST OF CAPITAL: EVIDENCE FROM IRAQ AND KUWAIT STOCK EXCHANGE

Abstract

The best approach for assessment of organizational success has mounted on very limited variables, among them the cost of capital. Tax avoidance stands in the centre of a process of cost of capital measurement. Due to that, management accounting research concentrates on effect of tax avoidance practices on the cost of capital of some selected commercial companies. The sample of research includes 33 organizations listed in stock exchanges of Kuwait and Iraq. Simultaneously, control variable such as company size, financial leverage, operating cash flows and return on assets (ROA) are added to the examined equation which allows calculation of the cost of capital. All the information, which were derived from the financial statements of chosen companies within the time period of 2013 till 2022, is considered as the basic and relevant data for the research. The interrelationships between variables were discovered through Methods of Moments-Quantile-Regression or MMQR. Resultantly, this quantitative statistical measurement suggests negative relationship between tax avoidance and the cost of capital. On the other hand, company size, financial leverage, operating cash flows, and ROA present positive correlations. The study reveals significant outcomes on the effect of tax avoidance on the cost of capital, thus remain a guide and provision of the empowered decision making for policymakers, who desire to improve the cost of capital by decreasing tax avoidance practices.