Introduction
To achieve sustainable economic development, governments must rely on tax revenues to finance their current expenditures. However, due to practices such as tax avoidance and tax evasion, tax revenues constitute a relatively small share of national income, underscoring the importance of understanding tax avoidance and its driving factors. Tax avoidance involves exploiting legal loopholes to reduce tax payments, offering companies substantial cash savings and enabling wealth transfer from the government to shareholders. Nonetheless, such practices also impose costs, including reputational damage, tax penalties, and increased agency costs. One critical factor influencing corporate tax behavior is strategic deviation, which refers to the extent a firm's strategic approach diverges from conventional industry norms. Firms exhibiting greater strategic deviation often face higher uncertainty and environmental risk, which may lead to more opportunistic behaviors such as tax avoidance. Several firm-level risk environment factors may moderate this relationship. Financial constraints—defined as a firm’s inability to secure sufficient funding for optimal growth—can intensify tax avoidance as firms seek to preserve internal funds when external financing is costly or inaccessible. Conversely, institutional ownership, representing the presence of large and influential shareholders such as banks, financial institutions, and government entities, can exert monitoring pressure that weakens the impact of strategic deviation on tax avoidance. Furthermore, product market competition increases business risks and operational pressures, thereby reinforcing the effect of strategic deviation on tax avoidance. These structural and institutional factors play a crucial role in shaping corporate tax strategies and should be considered by policymakers and regulatory authorities in designing effective tax oversight frameworks.
Methodology
The present research is descriptive in nature, applied in terms of its objective, and falls within the scope of deductive and retrospective studies using quantitative data. The statistical population of the present study includes companies admitted to the Tehran Stock Exchange from various industries. Using systematic elimination, 124 companies from those listed on the Tehran Stock Exchange during the period 2016–2023 were selected as the statistical population. Therefore, the observations of the present study over the time span from 2016 to 2023 amount to 922 company-year observations (8 years × 124 companies(. In this study, four hypotheses are examined as follows:
H1: Strategic deviation has a positive and significant effect on tax avoidance among companies listed on the Tehran Stock Exchange.
H2: Financial constraints strengthen the positive effect of strategic deviation on tax avoidance among companies listed on the Tehran Stock Exchange.
H3: Institutional ownership weakens the positive effect of strategic deviation on tax avoidance among companies listed on the Tehran Stock Exchange.
H4: Product market competition strengthens the positive effect of strategic deviation on tax avoidance among companies listed on the Tehran Stock Exchange.
Results and Discussion
The findings of this study indicate that strategic deviation has a positive and statistically significant impact on tax avoidance. With a coefficient of 0.002 and a p-value of 0.006, the first hypothesis is confirmed at the 95% confidence level. Moreover, financial constraint, introduced as a moderating variable in the second hypothesis, strengthens this relationship; the interaction term’s coefficient increased from 0.0008 to 0.0012, and its significance level (0.010) falls within the acceptable threshold. In the third hypothesis, institutional ownership is examined as a moderating variable, and the results show that it weakens the relationship between strategic deviation and tax avoidance. Specifically, the interaction term has a negative coefficient (-0.015) and a highly significant p-value (0.000), both supporting the hypothesis. Finally, the findings related to the fourth hypothesis demonstrate that product market competition also amplifies this relationship, with a considerably larger interaction coefficient (0.373) and strong statistical significance (p-value = 0.000), indicating robust explanatory power of the model. Overall, the results suggest that strategic deviation, under specific organizational and environmental conditions, significantly influences corporate tax avoidance, and the presence of moderating variables meaningfully alters the strength and direction of this relationship.
Conclusion
This study examined the relationship between strategic deviation and tax avoidance in companies listed on the Tehran Stock Exchange through four research hypotheses. The results revealed a significant positive effect of strategic deviation on tax avoidance, suggesting that firms deviating from industry-standard strategic paths are more prone to engage in opportunistic behaviors such as tax avoidance. This tendency aligns with agency theory, which posits that managers often prioritize personal interests over those of shareholders and society, especially when governance mechanisms are weak. The second hypothesis was also supported, indicating that financial constraints amplify this relationship. Limited access to financial resources pressures managers to preserve liquidity, making tax avoidance a more attractive strategy. The third hypothesis demonstrated that institutional ownership mitigates the positive effect of strategic deviation on tax avoidance. By enhancing oversight and reducing agency costs, institutional investors serve as a governance mechanism that curtails managerial opportunism and strategic misalignment. Finally, the fourth hypothesis was confirmed, showing that product market competition strengthens the link between strategic deviation and tax avoidance. Competitive pressure limits profitability, prompting managers to seek alternative methods, such as tax minimization, to compensate for financial shortcomings. Overall, the findings suggest that strategic deviation, under specific organizational and environmental conditions, has a significant impact on tax avoidance. Moreover, moderating variables such as financial constraints, institutional ownership, and market competition play a crucial role in shaping the intensity and direction of this relationship. These results are consistent with recent empirical studies, including those of Habib et al. (2024), and contribute to the growing body of literature on corporate governance, financial behavior, and tax planning strategies.