The Tell‐Tale Tone: Negative Tone Disclosure and Tax Avoidance in MENA Banks

This study examines the relationship between negative reporting tone in annual reports and tax avoidance practices in a panel of 63 banks operating in seven Middle Eastern and North African (MENA) countries observed over the 2012–2022 period. Using textual analysis based on the Loughran and McDonald dictionary to measure negative tone, we investigate opposing theoretical perspectives—the tax obfuscation hypothesis and the tax compliance hypothesis. Multivariate regression analysis reveals a significant inverse relationship between negative tone and tax avoidance, supporting the tax compliance perspective derived from signaling theory. Further analyses show that this relationship is strengthened by state, institutional, and foreign ownership, as well as by CEO duality and BIG 4 audit engagements. Additionally, bank‐specific characteristics including financial complexity, operational efficiency, income diversification, and Islamic banking principles significantly moderate the tone–tax avoidance relationship. These results have important implications for regulators and policymakers seeking to enhance tax compliance monitoring and strengthen transparency initiatives in the banking sector.

• Publication year

  2025

• Venue

  Managerial and Decision Economics

• Publication date

  2025-07-12

• Fields of study

  Not labeled

• Identifiers
  DOI 10.1002/mde.70008
• External record

  Open on Semantic Scholar

• Source metadata

  Semantic Scholar

• No claims are published for this paper.

• No concepts are published for this paper.

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