Abstract

This study examines the effect of the business scoring system, which is the relative financial ratios calculated through the financial statements, on tax avoidance of construction companies. This study also examines how the business scoring system effect the relationship between tax avoidance and firm value. The empirical results of this study are as follows. First, as the business scoring system increases, the level of tax avoidance increases. Second, as the level of tax avoidance increases, it negatively affects firm value. However, the negative effect of tax avoidance on firm value is alleviated as the business scoring system increases. The contribution of this study is as follows. Previous studies show that the construction industry is relatively less tax avoidable than other industries. Previous studies have argued that the construction industry considers earnings management rather than tax avoidance because order value is determined by the estimated value of construction ability evaluation. However, this study directly estimates the business scoring system determined by the financial factors among the four components of the estimated value of construction ability evaluation and empirically analyzed the differential tax avoidance behavior of the construction companies according to the business scoring system.

Keywords

• construction industry
• estimated value of construction ability evaluation
• business scoring system
• tax avoidance
• firm value

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