Investigate the role of tax risk and tax avoidance

Tax avoidance behavior is one of the most important strategies of companies. Companies can help reduce their tax burden by using tax avoidance. Tax risk can also arise specifically from tax avoidance. Tax risk can arise from a company's financial planning strategies that are independent of total operational risk. Companies that make good use of tax evasion can play a role in benefiting their shareholders. Tax avoidance stems from legal loopholes in tax law. Tax avoidance can shift risks to debtors and reduce their ability to pay their debts. On the other hand, tax avoidance can lead to debt conservation of debtors, which can strengthen their ability to pay their debts. Because tax risk becomes less predictable after tax deduction from cash flows, creditors can identify companies with higher tax risk as more risky debtors. A clear link between tax avoidance and tax risk is not uniformly available. Therefore, this study seeks to investigate the role of tax risk and tax avoidance.