Tax Avoidance and Accounting Conservatism

Bornemann, Tobias

doi:10.2139/ssrn.3114054

Cited by 13 publications

(9 citation statements)

References 36 publications

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“…Hsieh et al [21] observed that firms with overconfident CEOs and CFOs were more likely to participate in tax avoidance activities. Reputation was another motivation for executives to use power to avoid tax, consistent with Bornemann's [22] research.…”

Section: The Literature On Corporate Tax Avoidancesupporting

confidence: 75%

Does More Managerial Power Impede or Promote Corporate Tax Avoidance? Evidence from Listed Chinese Companies

Tang

Liu

et al. 2019

Sustainability

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Paying taxes is a form of corporate social responsibility. Corporate tax avoidance effectively reduces operating costs, thereby increasing shareholder returns, but the pros and cons are different for executives. This paper takes data from companies listed in China from 2000 to 2016 to explore the causal relationship between managerial power and corporate tax avoidance, using principal component analysis and entropy weight methodology to construct managerial power. First, we conduct an ordinary least square regression, and then we employ alternative measures to avoid taxation, and use managerial power as a robustness check. Next, we rerun the model by using quantile regression and propensity score matching. Finally, in order to tackle problems with endogeneity, we carry out regressions utilizing instrumental variables and simultaneous regression equations. We conclude that managerial power reduces corporate tax avoidance, and firms with more managerial power have fewer incentives to avoid taxes. The results of this paper can guide the taxation of companies listed on the Chinese market to achieve the full payment of tax obligations by reinforcing managerial power in companies, which improves national taxation and leads to sustained economic growth.

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Section: The Literature On Corporate Tax Avoidancesupporting

confidence: 75%

Does More Managerial Power Impede or Promote Corporate Tax Avoidance? Evidence from Listed Chinese Companies

Tang

Liu

et al. 2019

Sustainability

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“…Jiménez-Angueira et al (2021) evidence that tax planning associated with unrecognized tax benefits (UTBs) increases the firm value when related to higher accounting conservatism. Furthermore, Bornemann (2018) documents that future tax cuts drive accounting conservatism, and this is more pronounced in countries with higher book-tax conformity (i.e., there is an association between book and tax income). Hellman (2008) argues for a strong link between accounting and taxation in code-law countries.…”

Section: Accounting Conservatism and Tax Aggressivenessmentioning

confidence: 99%

Tax aggressiveness as a determining factor of conditional conservatism in Brazil,

Martinez

Júnior

Sena

2022

Rev. contab. finanç.

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This paper investigates whether the degree of tax aggressiveness is associated with conditional conservatism in Brazil. After a thorough literature review on accounting conservatism by Brazilian academia and a discussion about tax aggressiveness and accounting conservatism, a literature gap was found because the relationship between a firm's degree of tax aggressiveness and its conditional conservatism had not been investigated previously. Taxable income has a relationship with accounting income in the Brazilian corporate income tax system. Hence, tax planning can affect financial information properties. This study offers a partial explanation of accounting conservatism based on tax issues that contribute to the conservatism and taxation literature. The results suggest that tax strategies that aim to avoid tax burden are related to conditional conservative accounting. Hence, the practice of conditional conservatism in Brazil appears to be linked with tax-deductible alternatives of reducing earnings, which would explain tax planning’s association with the degree of conditional conservatism in financial reporting. This finding is relevant to financial reporting users that can consider our results in their analysis and to management that seeks to understand their decisions about tax planning better. For this research purpose, two Basu models (Basu, 1997) were adopted, adapted with tax-aggressiveness controls. The effective tax rate (ETR) was used as a tax-aggressiveness metric, controlling firms with both high and low ETR. The study period was from 2010 to 2019 for Brazilian firms from B3 S.A. - Brasil, Bolsa, Balcão (B3). The findings demonstrate a significant relationship between tax avoidance and conditional conservatism, that is, more tax-aggressive firms tend to use more conservative accounting.

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“…The negative association of the C-score and CETR corroborates the hypothesis of the study that, ceteris paribus, conditional conservatism is negatively associated with tax burdens. Bornemann (2018) conducted a study in Austria to analyse the relationship between accounting conservatism, future tax rate cuts, and countries' level of book-tax conformity using a panel of firms across 18 countries from 1995 to 2010. He used the C-score to measure conditional conservatism and book-tax conformity to measure tax avoidance.…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

Effect of Tax Avoidance on Accounting Conservatism of Listed Non-Financial Firms in Nigeria

Suleiman

Barnabas

2021

Journal of Economics and Sustainability

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The study seeks to ascertain the effect of tax avoidance on the accounting conservatism of listed non-financial firms in Nigeria. Tax avoidance was proxied by Generally Accepted Accounting Principle Effective Tax Rate (GETR), Cash Effective Tax Rate (CETR), and Book Tax Difference (BTD), while accounting conservatism was measured using Negative Accruals (NA). The control variables utilised were leverage, Return on Asset (ROA), and Firm Size (FS). The study covered a period of seven years (2014-2020) and a population of forty-eight listed non-financial firms on the Nigerian stock exchange. The data were analysed using the panel regression technique. The findings discovered that GETR and BTD significantly and negatively affect unconditional conservatism. Overall, this paper shows that tax avoidance is a determinant of financial reporting conservatism in Nigeria.

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Tax Avoidance and Accounting Conservatism

Cited by 13 publications

References 36 publications

Does More Managerial Power Impede or Promote Corporate Tax Avoidance? Evidence from Listed Chinese Companies

Does More Managerial Power Impede or Promote Corporate Tax Avoidance? Evidence from Listed Chinese Companies

Tax aggressiveness as a determining factor of conditional conservatism in Brazil,

Effect of Tax Avoidance on Accounting Conservatism of Listed Non-Financial Firms in Nigeria

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