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This paper aims to examine the impact of tax avoidance on the cost of debt. It also investigates the effect of tax risk on the relationship between tax avoidance and the cost of debt.

Two hypotheses are tested on a sample of nonfinancial French firms listed in the société des Bources Françaises 120 index from 2010 to 2022 using the feasible generalized least squares. To ensure the robustness of the findings, the authors changed the measures of tax avoidance and tax risk and used instrumental variable regression to effectively address concerns related to endogeneity. Additional analysis is conducted to examine if the relationship between tax avoidance and the cost of debt varies based on the magnitude of tax risk.

The authors found that tax avoidance negatively affects the cost of debt. However, when tax avoidance is associated with a high risk, it impacts positively the cost of debt.

This study’s findings are relevant to firms, creditors and French lawmakers. Creditors must make their decision to grant credit based simultaneously on proxies of tax avoidance and tax risk. Managers must effectively manage tax risks to protect their financial decisions, urging French policymakers to implement new regulations on corporate tax risk management.

To the best of the authors’ knowledge, this study is the first to have investigated the joint impact of tax avoidance and tax risk on the cost of debt in the French context.

This paper aims to determine the effect of equity financing on bank stability during normal and crisis periods.

This study uses a static panel regression that includes pooled ordinary least square, random effect and fixed effect model to examine the influence of equity financing on bank stability. In estimating bank stability during a financial crisis, the authors predict the occurrence of a crisis using the early warning system (EWS). The authors then used z-score to measure Islamic banks’ stability.

Islamic banks that offer equity financing structure are more stable compared to Islamic banks without such structure. Islamic banks with medium equity financing have highest stability relative to Islamic banks with high or low equity financing. During crises, the Islamic banks with equity financing structure remain relatively stable compared to other Islamic banks.

The sampling coverage could have included a larger number of countries and banks.

The authorities need to strengthen the banking framework to support the Islamic financial products by encouraging a wider use of risk-sharing instruments. Besides using a debt-like financing structure, Islamic banks should also place emphasis on equity financing in instilling the banking sector stability. In monitoring banks with equity financing, the authorities may need to look into the level of equity financing.

Besides avoiding riba and gharar in financing, equity financing encourages cooperation and participation among society as they share the risks.

This paper analyses the effect of equity financing on the Islamic banks stability during normal and crisis periods. This paper further examines the intensity of the equity financing and its influence on bank stability.