Real Effects of Corporate Taxation: A Review

Jacob, Martin

doi:10.1080/09638180.2021.1934055

Cited by 54 publications

(10 citation statements)

References 160 publications

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“…Furthermore, better measurements beyond ETRs (Blouin, 2014;Brühne & Jacob, 2021;Hanlon & Heitzman, 2010) are required in our setting, which is characterized by the unique features of China's capital markets and tax environment (Tang, 2020). In addition, tax scholars are calling for more studies on the consequences, especially the real effects, of tax avoidance, (e.g., Brühne & Jacob, 2021;Jacob, 2022). Arguably, future research on the real effects of the reduced tax-avoidance behavior of MLS in Chinese-listed SOEs is worth investigating to further enrich the findings of our study.…”

Section: Limitations and Future Research Directionsmentioning

confidence: 99%

Multiple Large Shareholders, Identity, and Corporate Tax Avoidance

Huyghebaert,

Kang,

Wang

et al. 2024

Manag. Organ. Rev.

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In recent years, the variation in firms' tax-avoidance behavior has attracted a lot of attention, both theoretically and empirically. This study investigates the governance role of multiple large shareholders in firms' tax-avoidance behavior, using a sample of Chinese state-controlled listed firms over the period 2004–2016. We find that the ownership stake of a firm's largest shareholder is negatively associated with tax avoidance among state-controlled firms. Second, other large non-state shareholders negatively affect tax avoidance of state-controlled firms. The former effect is particularly strong when the local government is the controlling shareholder. Finally, differences in institutional quality influence the largest shareholder's tendency to engage in tax avoidance in state-controlled firms. For state-controlled firms, a better institutional environment elicits more tax avoidance and thus curtails minority-investor expropriation.

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Section: Limitations and Future Research Directionsmentioning

confidence: 99%

Multiple Large Shareholders, Identity, and Corporate Tax Avoidance

Huyghebaert,

Kang,

Wang

et al. 2024

Manag. Organ. Rev.

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“…2.2.3 Firm-level control variables. We use firm size (SIZE), leverage (LEVER), research and development expenses (RD_DUMMY), sales growth (SG), market-to-book ratio (MB), plant, property, and equipment (PPE), firm profitability (ROA), cash flow from operations (CFOs), cash flow volatility (CF_VOL), and firm age (AGE) as control variables (Armstrong et al, 2015;Jacob, 2021).…”

Section: Variable Of Interestmentioning

confidence: 99%

Geopolitical risk and corporate tax behavior: international evidence

Ramesh

2023

IJMF

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PurposeThis study examines the association between geopolitical risk (GPR) and corporate tax, which is a major source of revenue for the government and a significant explicit cost for firms. The authors use a comprehensive measure of GPR to study its effects on corporate taxes by using an international sample.Design/methodology/approachThe authors adopt the geopolitical measure constructed by Caldara and Iacoviello (2022) as a proxy for GPR and cash-effective tax rate benchmarked with statutory tax rate to measure corporate tax avoidance. The authors employ panel regression with fixed effects (FEs) to investigate the impact of GPR on corporate tax avoidance. The authors also conduct a battery of robustness tests to ensure the strength of the study’s results.FindingsThis study’s empirical results indicate that sample firms increase their tax avoidance amid increasing GPR. Further analyses show that financial constraints incentivize firms to avoid taxes during rising geopolitical tensions. The authors also provide evidence on the role of firm-level and country-level governance in weakening the association between GPR and tax avoidance.Practical implicationsPolicymakers and governments may strengthen the enforcement rule to limit aggressive tax practices of corporates during GPR to balance fiscal deficit. In addition, this study sheds light on the debate among administrators and politicians over the efficacy of current tax laws and governance structures in the presence of heightened GPR.Originality/valueThe authors extend the literature on GPR by analyzing its effect on corporate tax avoidance. Unlike existing single-country studies, the authors use a cross-country setup to investigate the impact of GPR on tax avoidance, making this study’s results more generalizable as the authors control for a host of country, industry, and time factors. Apart from political uncertainty, terrorism, and climatic issues, the authors document GPR as a strong macroeconomic driver of corporate tax avoidance. The authors make a new contribution to the literature on the moderating role of governance and institutional factors on the association between tax avoidance and GPR in an international context. The authors also contribute to the literature on macroeconomic determinants of tax avoidance.

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“…and "How the trade-off between debt and non-debt tax shields affect the composition and the cost of the capital structure?". Prior literature reviews have considered the link between taxation and capital structure (e.g., Graham, 2003;Graham & Leary, 2011;Feld et al, 2013;Jacob, 2022). However, since these reviews are much broader in their scope, only limited attention has been posed on the trade-off between debt and NDTS in capital structure decisions.…”

Section: Introductionmentioning

confidence: 99%

“…This study can contribute to a better understanding of the research findings on the trade-off between debt and non-debt tax shields and on its consequences for a firm's capital structure in several ways. First, although there exists literature reviews examining the real effects of taxation (Hanlon & Heitzman, 2010;Wang et al, 2020;Jacob, 2022) and the determinants of corporate capital structure (e.g., Graham, 2003;Graham & Leary, 2011;Feld et al, 2013), no prior review has focused in detail on the trade-off between debt and non-debt tax shields and the consequences that such trade-off have on firm's capital structure. A specific focus on the trade-off literature is thus justified, also considering the increasing number of recent studies building on the framework developed by DeAngelo & Masulis (1980) to examine complex forms of non-debt tax shields such as tax aggressiveness and tax sheltering (e.g., Lin et al, 2014;De Vito & Jacob, 2021).…”

Section: Introductionmentioning

confidence: 99%

The Debt and Non-Debt Tax Shields Trade-Off: A Review

Gabrielli¹

2023

IJARAFMS

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The trade-off between debt and non-debt tax shields has gained momentum among scholars and policymakers, especially in the current economic environment affected by the pandemic and the energy crisis. The literature on the tax shields trade-off arises from the theoretical framework by DeAngelo and Masulis (1980) and has developed over time in a fragmented manner in various disciplinary fields such as accounting, finance, and economics. Using a systematic literature review approach, this study provides an up-to-date survey of the theoretical and empirical literature examining the trade-off between classes of tax shields and its consequences for a firm's capital structure. The systematic analysis of the results of 46 studies supports the existence of an inverse relationship between debt and non-debt tax shields, consistent with a debt substitution hypothesis. However, conflicting evidence remains regarding this trade-off, as well as on its consequences for the corporate capital structure. More recent research also highlights the importance of considering several moderating factors when examining the relationship between debt and non-debt tax shields. This study encourages further research on the topic. Further investigation on the role of free cash flow and agency conflicts in explaining the tax avoidance-capital structure relationship is needed. Moreover, future studies may consider exploiting the exogenous shock provided by the recent Covid-19 crisis for an in-depth analysis of the impact of non-debt tax shield policies on the corporate capital structure.

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Real Effects of Corporate Taxation: A Review

Cited by 54 publications

References 160 publications

Multiple Large Shareholders, Identity, and Corporate Tax Avoidance

Multiple Large Shareholders, Identity, and Corporate Tax Avoidance

Geopolitical risk and corporate tax behavior: international evidence

The Debt and Non-Debt Tax Shields Trade-Off: A Review

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