Who Invests in Corporate Tax Avoiders?

Rego, Sonja O.; Williams, Brian; Wilson, Ryan J.

doi:10.2139/ssrn.2919004

Cited by 5 publications

(2 citation statements)

References 43 publications

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“…Some stream of studies have focused on linking tax planning to some relevant outcome variables such as firm's value and profitability (Christina, 2019; Kportorgbi, 2013; Lee and Yoon, 2020; Razali et al , 2018; Santa and Rezende, 2016), transfer pricing (Brock and Pogge, 2014; Cristea and Nguyen, 2016; Hopland et al , 2018; Janský, 2013; Muhammadi et al , 2016; Taylor and Richardson, 2014), cost of equity (Goh et al , 2016), the term structure of debt (Bolton et al , 2014; Fatica et al , 2013; Platikanova, 2017). Other stream of studies focus on incentives for tax planning such as equity compensation (Rego et al , 2017), institutional ownership (Bird and Karolyi, 2017; Cheng et al , 2012; Khan et al , 2017), board intervention (Armstrong et al , 2015) and analyst cash flow forecast (Ayers et al , 2018).…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

Financial constraints and tax planning activity: empirical evidence from Ghanaian banking sector

Seidu

Queku

Carsamer

2021

JEAS

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PurposeThis paper focused on financial constraints scenario and tax planning activities of banks in Ghana. The study explores how financial constraints could motivate the banks to pursue tax planning mechanism and the implication on tax revenue mobilisation.Design/methodology/approachThe paper followed generalised method of moments and fixed effect estimators to investigate the financial constrained-tax planning activity nexus. Simulation approach is adopted to provide financially constrained bank scenario. Besides contemporaneous analysis, sensitivity analysis is conducted to determine time varying effect. Data from all the 20 commercial banks which have operated from 2008 to 2018 were used.FindingsThe paper found that when banks are faced with financial constraints, they exhibit lower cash-effective-tax-rate. The decomposition analysis also revealed that financially constrained banks are likely to take on both short- and long-term tax planning opportunities. The paper also found evidence of persistence in the tax planning activities under financial constrained scenario.Originality/valueThis paper is one of the few studies which have extended the tax planning literature to the Ghanaian banking sector. Further novelty is seen from the development of financial constraint scenario from liquidity and solvency. Liquidity and solvency are the anchors for continuity of banking operation and sensitive to regulatory watch and sanctions. Therefore, by applying simulation approach to trigger financial constraints scenarios from these fundamental indicators reveals the extent to which commercial banks rely on tax planning opportunities to mitigate the consequence of financial constraints.

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Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

Financial constraints and tax planning activity: empirical evidence from Ghanaian banking sector

Seidu

Queku

Carsamer

2021

JEAS

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“…That's the reason why companies always do avoid tax, while other company do not avoid taxes even though there are many opportunities to reduce taxes which can be done with existing regulations. (Dyreng et al, 2019) Different research from Rego et al, (2017), (Hanlon et al, 2017) argues that the purpose of tax avoidance is carried out to attract shareholders' interest in increasing cash flow. This action is carried out by managers depending on governance in the sense that companies believe themselves to investors that they will receive rewards from their investments.…”

Section: Introductionmentioning

confidence: 99%

The Effect Of Good Corporate Governance Implementation On Tax Avoidance Behavior

Agustina

Mappadang

2022

WIDYAKALA JOURNAL

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This research is based on the intention to see the extent of the effect of independent commissioners, institutional ownership audit committees, managerial ownership, and the comparison of previous and current year tax avoidance on tax avoidance, and the relationship of good corporate governance to tax avoidance in companies. The occurrence of a phenomenon due to bad corporate governance that has an impact on the trend of tax avoidance that is carried out in a legal way as well as an illegal way is further exacerbated by the COVID-19 pandemic. The independent variable is measured by taking several variables in corporate governance. Tax avoidance is used as the dependent variable and is measured by CETR. The sample was taken by purposive sampling by collecting company data on the IDX totaling 73 from the same businesses in the property and real estate business in 2014-2020. The statistical analysis uses panel data regression analysis with Eviews 10 as the data processing application. The results show that independent commissioners do not significantly affect tax avoidance, the audit committee does not significantly affect itax avoidance, institutional ownershipi does not significantly affect itax iavoidance, managerial ownership significantly affects tax avoidance, tax avoidance in the previous year period significantly affects tax avoidance in the current year period.

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Who Gets to Play Dirty? Using Legitimacy Theory to Examine Investor Reactions to Differing Modes of Corporate Tax Minimization*

Gillette

Stinson

2022

Contemporary Accting Res

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This study examines how information about a corporation's tax minimization activities and primary operations jointly influence investor behavior. Prior research identifies fear of investor backlash as a primary curb on corporations' tax minimization. However, evidence for such reactions remains mixed. Drawing on the psychological framework of legitimacy theory, we predict and find that the interaction between operations-level validity and tax-level propriety influences investor behavior. For companies with lower perceived validity in their primary operations, perceived improper tax minimization elicits strong negative reactions from investors, while proper tax minimization partially compensates for a lack of validity. Conversely, companies with greater perceived operational validity are mostly insulated from negative reactions to tax strategies deemed improper. Thus, management concerns over the reputational risks of tax minimization may be misplaced in some contexts, as companies whose primary operations are more valued by society may be afforded more leeway in their tax strategies.

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Who Invests in Corporate Tax Avoiders?

Cited by 5 publications

References 43 publications

Financial constraints and tax planning activity: empirical evidence from Ghanaian banking sector

Financial constraints and tax planning activity: empirical evidence from Ghanaian banking sector

The Effect Of Good Corporate Governance Implementation On Tax Avoidance Behavior

Who Gets to Play Dirty? Using Legitimacy Theory to Examine Investor Reactions to Differing Modes of Corporate Tax Minimization*

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