The effect of tax avoidance practices on investment efficiency, free cash as moderating variable-an empirical study on the companies listed in Egyptian Stock Exchange

Document Type : Original Article

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Accounting Department Faculty of Commerce Alexandria University Alexandria Egypt

Abstract

This research aims at analyzing and examining the effect of tax avoidance on investment efficiency, the effect of free cash on this relation, using a sample of 44 companies listed in Egyptian Stock Exchange from 2015 to 2020.
The study results showed an insignificant negative relation between tax avoidance and investment efficiency. The results also indicated a significant and positive effect of the size of the company and the efficiency of the investment as a result of increasing the company's ability to obtain administrative services with higher efficiency and financing at a lower cost.
The findings showed a positive and significant effect of the effect of free cash on the relation between tax avoidance and investment efficiency.
The researcher confirmed the test results using a set of sensitivity analysis, where it was found that there was a significant negative relationship between tax avoidance and investment efficiency when the percentage of taxes paid to net income before tax was used to measure tax avoidance practices. It also found that the effect of free cash flows on the relationship between tax avoidance practices and investment efficiency achieved in the case of profitable companies only.

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