The Effect of the Mandatory Disclosure of Corporate Tax Returns on Reporting Bias

Allen, Eric J.; Uysal, Aydin

doi:10.2139/ssrn.4185130

SSRN Journal

2022

DOI: 10.2139/ssrn.4185130

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The Effect of the Mandatory Disclosure of Corporate Tax Returns on Reporting Bias

Eric J. Allen

Aydin Uysal

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2023

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Is tax return information useful to equity investors?

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2023

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I examine whether tax return information is useful to equity investors. I do so indirectly, by exploiting unique features of the syndicated loan market, as evidence shows that lenders obtain tax returns from borrowers and that lenders’ private information is transmitted to equity markets when institutional investors are part of a loan syndicate. I find significant increases in tax expense valuation and decreases in tax-related market anomalies following the issuance of institutional syndicated loans, suggesting that equity investors find information about firm performance in tax returns that is useful for their trading decisions. I also find evidence suggesting that institutional investors may determine their loan syndicate participation in part based on the value of tax return information. This study extends prior research and informs policy debates over public disclosure of corporate tax return information by providing evidence to support that tax returns can be useful to investor decision making.

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Is tax return information useful to equity investors?

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2023

Rev Account Stud

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The Effect of the Mandatory Disclosure of Corporate Tax Returns on Reporting Bias

Cited by 1 publication

References 29 publications

Is tax return information useful to equity investors?

Is tax return information useful to equity investors?

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