Does corporate tax aggressiveness explain future stock price crash? Empirical evidence from France

Abstract

Purpose This study aims to examine the impact of corporate tax aggressiveness on future stock price crash. It also tests the corporate tax aggressiveness prediction power of the stock price crash via a long forecast window (two years). Design/methodology/approach The study sample consisted of 1,169 firm-years observations. The multivariate analysis uses three measures of stock price crash risk, as a dependent variable. The key variable is tax aggressiveness lagged by one period (one year) as all independent variables. As a robustness check, this paper uses alternate measures of earning management and a longer forecast window (two years) to predict stock price crash risk. Findings Tax aggressiveness activity is positively related to a firm-specific future stock price crash. Corporate tax aggressiveness predicts stock price crash risk for a long forecast window (two years). The findings are robust to a number of checks and have several policy implications. Practical implications Investors should be cautious about the different risks of corporate tax aggressiveness: stock price crash risk. The important role of firm disclosure which leads to more relevant stock price informativeness. Adopt accounting conservatism behavior. The market perceives a socially irresponsible behavior and may harm the firm reputation. Social implications Incentives for French regulators to reduce the feeling of injustice by SMEs vis-à-vis large international companies that have the possibility of transferring part of their profits to a country different from that where it should be taxed to reduce their tax bases. Originality/value French companies are among the heavily taxed in Europe which makes France a particularly suitable context for studying tax aggressiveness issues. The first in the French context, that document a significant and positive relation between tax aggressiveness and future crash risk. It focuses on the important role of corporate tax planning as a means of withholding bad news and its consequences in inflating stock prices.

Is it hard to be different during the COVID-19 crisis? Investigating the relationship between corporate social responsibility and earnings management

“…However, the coefficient of POST Â TREAT when we consider Negative_DA as the dependent variable is not statistically significant suggesting that SR firms do not manage Earnings management earnings downward during this crisis. Therefore, we do not confirm arguments of previous studies carried out on other crises and showing that during a crisis period, CEOs manage earnings downward to justify their bad past performance or even to avoid any "political sanctions" such as higher taxes, stricter regulations and supervision (Hamza and Zaatir, 2021), withdrawal of incentives (Rodrigues et al, 2019) or reception of a stimulus package or bailout funds (Ozili and Arun, 2020).…”

“…CEOs have many incentives to manage earnings during crisis times such as maintaining earnings over a time series like attracting potential investors (Lassoued and Khanchel, 2021;Lassoued, 2021Lassoued, , 2022, maintaining their relationships with stakeholders (Lisboa and Kacharava, 2018) and especially reassuring investors (Arthur et al, 2015). Specifically, earnings management (EM) practice during hard times aims to justify the bad past practices of managers or even to avoid any "political sanctions" (Hamza and Zaatir, 2021), withdraw of incentives (Rodrigues et al, 2019), receipt a stimulus package or bailout funds (Ozili and Arun, 2020), restructure debts under better renegotiation conditions (Asquith et al, 1994) and obtain government support or opposing new regulations (Filip and Raffournier, 2014). As COVID-19 is a much observable exogenous shock and many of these incentives apply in this case, chief executive officers (CEOs) have incentives to manage earnings during the health crisis.…”

تأثیر جودة المعلومات المحاسبیة على العلاقة بین میول المستثمرین وخطر انهیار أسعار الأسهم: أدلة من الشركات المقیدة بالبورصة المصریة

“…‫ب‬ ‫عمعته‬ ‫س‬ ‫عى‬ ‫،ا‬ ‫عا‬ ‫الحد‬ ‫و‬ ‫ب‬ ‫و‬ ‫ب‬ ‫ع‬ ‫ع‬ ‫التقاف‬ ‫عر‬ ‫ع‬ ‫لدط‬ ‫عه‬ ‫ع‬ ‫عرف‬ ‫ع‬ ‫ع‬ ‫قاي‬ ‫و‬ ‫عر‬ ‫ع‬ ‫أخ‬ ‫عة‬ ‫ع‬ ‫ناحي‬ ‫عن‬ ‫ع‬ ‫م‬ ‫عاع‬ ‫ع‬ ‫ي‬ ‫ارور‬ ‫اامعر‬ ‫عا‬ ‫ع‬ ‫إن‬ (Ball, 2009;Skinner, 1994) ‫عة‬ ‫ع‬ ‫النقط‬ ‫عى‬ ‫ع‬ ‫إل‬ ‫عولها‬ ‫ع‬ ‫وول‬ ‫عيمة‬ ‫ع‬ ‫الس‬ ‫عار‬ ‫ع‬ ‫اسخب‬ ‫ع‬ ‫ع‬ ‫ا‬ ‫اا‬ ‫عر‬ ‫ع‬ ‫عس‬ ‫ع‬ ‫م‬ ‫عن‬ ‫ع‬ ‫ولن‬ ‫ب‬ -‫عول‬ ‫ع‬ ‫التح‬ ‫عة‬ ‫ع‬ ‫نقط‬ Tipping Point -‫عر‬ ‫اسم‬ ‫عدتب‬ ‫اح‬ ‫و‬ ‫عة‬ ‫افع‬ ‫عوم‬ ‫الس‬ ‫عى‬ ‫إل‬ ‫الدروج‬ ‫ف‬ ‫اسخبار‬ ‫هذ‬ ‫عدأ‬ ‫بهاب‬ ‫اطحتدا‬ ‫المديروض‬ ‫معها‬ ‫ستطيس‬ ‫ط‬ ‫الت‬ ‫أس‬ ‫ل‬ ‫ت‬ ‫عر‬ ‫ز‬ ‫الذي‬ ‫عار‬ ‫اطنهي‬ ‫لدطر‬ ‫اسسه‬ ‫عار‬ (Hutton et al, 2009;Jin & Myers, 2006) ‫عر‬ ‫عتع‬ ‫ز‬ ‫وي‬ ‫ب‬ ‫عاع‬ ‫إ‬ ‫اسر‬ ‫ت‬ ‫راار‬ ‫و‬ ‫عة‬ ‫المالي‬ ‫ير‬ ‫عار‬ ‫التق‬ ‫عول‬ ‫م‬ (Bleck & Liu, 2007;Francis et al, 2016;C. Kim et al, 2019;Kim & Zhang, 2014;Li et al, 2022;Zhu, 2016) ‫عد‬ ‫التعس‬ ‫يع‬ ‫عر‬ ‫ال‬ ‫عب‬ ‫التعن‬ ‫و‬ ‫ب‬ (Garg et al, 2022;Hamza & Zaatir, 2021;Kim et al, 2011) ‫سنه‬ ‫ولير‬ ‫التنديذيين‬ ‫ين‬ ‫لامدير‬ ‫امدت‬ ‫الا‬ ‫الثقة‬ ‫و‬ ‫ب‬ (Andreou et al, 2017;Lee et al, 2019;Liang et al, 2020) ‫عة‬ ‫الداخاي‬ ‫عة‬ ‫الرقاإل‬ ‫عة‬ ‫إللنلم‬ ‫عوهري‬ ‫الع‬ ‫عع‬ ‫ال‬ ‫و‬ ‫ب‬ (J. Hong & Lee, 2015; J.…”

The effect of XBRL adoption on corporate tax avoidance: empirical evidence from an emerging country

“…In general, tax avoidance activities are the primary source of permanent differences, allowing a firm to reduce taxes payable while maintaining accounting profit (Ftouhi and Ghardallou, 2020). The primary purpose of tax avoidance is to cut down expected tax liabilities (Balakrishnan et al , 2019; Hamza and Zaatir, 2020).…”