Customer–supplier relationships and corporate tax avoidance

Cen, Ling; Maydew, Edward L.; Zhang, Liandong; Zuo, Luo

doi:10.1016/j.jfineco.2016.09.009

Cited by 335 publications

(128 citation statements)

References 58 publications

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“…However, results from Wald tests fail to reject the null hypothesis of exogeneity in our setting, suggesting that our analysis is not exposed to an endogeneity problem. We arrive at a similar conclusion when we follow Cen et al () and consider the percentage of principal customer firms in a supplier's industry or the durable goods industry as potential instrumental variables.…”

supporting

confidence: 66%

Greater Reliance on Major Customers and Auditor Going‐Concern Opinions

Dhaliwal

Michas

Naiker

et al. 2020

Contemporary Accting Res

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In this study, we predict and provide evidence that distressed firms that rely more heavily on major customers for sales have a comparatively higher incidence of receiving going‐concern opinions (GCOs). Moreover, we find that the effect of increased reliance on major customers is driven by firms that are more distressed. We also theorize that variations in key characteristics of the relationship between a distressed firm and its largest major customer are incrementally linked to GCOs, and present evidence consistent with this. Specifically, we find that the effect of greater reliance on major customers is driven by firms that are relatively smaller than their largest major customer. Additionally, we find that greater reliance on major customers is positively (negatively) associated with GCOs when firms are in a shorter (longer) relationship with their major customer and when firms have a different auditor to (same auditor as) the largest major customer. Overall, our study indicates that supply chain relationships are relevant business risks associated with auditors' going‐concern assessments.

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supporting

confidence: 66%

Greater Reliance on Major Customers and Auditor Going‐Concern Opinions

Dhaliwal

Michas

Naiker

et al. 2020

Contemporary Accting Res

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“…First, it contributes to the literature on the determinants of corporate tax aggressiveness. Recent research has examined the effect of ownership structure (e.g., Badertscher, Katz, and Rego ; Chen, Chen, Cheng, and Shevlin ; Cheng, Huang, Li, and Stanfield ; McGuire, Wang, and Wilson ), top executive incentives (e.g., Desai and Dharmapala ; Rego and Wilson ), division/tax manager incentives (e.g., Armstrong, Blouin, and Larcker ; Phillips ; Robinson, Sikes, and Weaver ), corporate governance (Armstrong, Blouin, Jagolinzer, and Larcker ; Minnick and Noga ), country‐level characteristics and IRS monitoring (Atwood, Drake, Myers, and Myers ; Hoopes, Mescall, and Pittman ), auditor tax expertise (McGuire, Omer, and Wang ), individual manager characteristics (Dyreng, Hanlon, and Maydew ), and stakeholder relationships (Cen, Maydew, Zhang, and Zuo ; Chyz, Leung, Li, and Rui ). Our study extends this line of research by identifying political connections as one significant factor that influences corporate tax aggressiveness.…”

Section: Introductionmentioning

confidence: 99%

Corporate Political Connections and Tax Aggressiveness

Kim

Zhang

2015

Contemporary Accting Res

Self Cite

365

264

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This study investigates the relation between corporate political connections and tax aggressiveness. We study a broad array of corporate political activities, including the employment of connected directors, campaign contributions, and lobbying. Using a large hand-collected data set of U.S. firms' political connections, we find that politically connected firms are more tax aggressive than nonconnected firms, after controlling for other determinants of tax aggressiveness, industry and year fixed effects, and the endogenous choice of being politically connected. Our findings are robust to various measures of political connections and tax aggressiveness. These results are consistent with the conjecture that politically connected firms are more tax aggressive because of their lower expected cost of tax enforcement, better information regarding tax law and enforcement changes, lower capital market pressure for transparency, and greater risk-taking tendencies induced by political connections.

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“…Matching is conducted by estimating the regression of corporate tax avoidance on its determinants which include firm size (size), firm age (firmage), book-to-market ratio (btm), financial leverage (lev), pretax return on assets (roa), property, plant and equipment (ppe), intangible assets (intangible), equity income (equityic), and foreign income (foreignic) (e.g. Cheng et al 2012; (3) Gao et al 2016;Cen et al 2017). 537 matched pairs are identified following the k-to-k CEM matching.…”

Section: Control For Endogeneity-a Quasi-natural Experiments (Fin48)mentioning

confidence: 99%

“…Prior studies (e.g. Chen et al 2010;Graham et al 2014;Menichini 2017;Cen et al 2017) document that the main benefit of corporate tax avoidance to a firm lies in the tax savings and associated increased cash flow. However, there are potential negative consequences to corporate tax avoidance, including reputational losses (Chen et al 2010;Hanlon and Slemrod 2009), tax examination costs (Mills 1998;Mills and Newberry 2001), increased litigation risk (Graham and Tucker 2006), increased audit fees (Hanlon et al 2012;Donohoe and Knechel 2014;Kuo and Lee 2016), substantive penalties imposed by tax authorities (Wilson 2009;Li et al 2018), reduction in shareholder wealth due to managerial rent extractions Dharmapala 2006, 2009), heightened stock price crash risk (Kim et al 2011), and an increase in cost of capital (e.g.…”

Section: Introductionmentioning

confidence: 99%

The impact of corporate tax avoidance on analyst coverage and forecasts

Ren

Taffler

2019

Rev Quant Finan Acc

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Corporate tax avoidance is likely to be associated with a high level of earnings management and with high financial opacity in the time-series. On this basis, we hypothesize that analyst coverage is negatively associated with corporate tax avoidance. Our results confirm this conjecture, and are robust to using a firm-fixed-effects model and a quasi-natural experiment to control for potential endogeneity. Additional analysis shows that analyst coverage is negatively related to tax risk, but there is no evidence that the informativeness of, or errors in, analyst forecasts are associated with tax avoidance. Overall, our study advances understanding of the implications of corporate tax avoidance for analyst behavior.

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Customer–supplier relationships and corporate tax avoidance

Cited by 335 publications

References 58 publications

Greater Reliance on Major Customers and Auditor Going‐Concern Opinions

Greater Reliance on Major Customers and Auditor Going‐Concern Opinions

Corporate Political Connections and Tax Aggressiveness

The impact of corporate tax avoidance on analyst coverage and forecasts

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