The effect of board characteristics and company size on tax transparency

The purpose of the present study is to investigate the effect of board characteristics and company size on tax transparency of listed companies in Tehran Stock Exchange. Tax transparency means properly measuring, presenting and disclosing the amount of tax in the tax returns. Tax transparency, in addition to providing corporate social responsibility (from the perspective of identifying and paying tax liabilities under tax law), will help to make the proper decisions for investors and ultimately tax system policymakers

Accordingly, in the present study, tax transparency was measured by five criteria (disclosure of tax status information, lack of material tax distortion, no significant tax ambiguity, no significant tax adjustments, and speed in determining final tax filing). Also, the effect of board characteristics on two levels, including the level of components of board characteristics (board size, managerial dichotomy, board independence, financial knowledge of the board of directors, non-executive chairman), and the combination of characteristics were tested.

In this regard, a sample of 540 company-year was tested. The results showed that the combined measure of board characteristics (total of attributes) had a direct impact on corporate tax transparency, At the component level, the coefficients of the two components, namely the size and the financial knowledge of the board members, have a direct and meaningful impact on the tax transparency of the company, but other features include duality of the CEO and non-executive chief have not impact. In addition, the size of the company does not have a significant impact on corporate tax transparency. Among the control variables, financial leverage has an inverse relationship, and return on assets has a direct relationship with tax transparency.