The Experts below are selected from a list of 19494 Experts worldwide ranked by ideXlab platform
Mihir A Desai - One of the best experts on this subject based on the ideXlab platform.
-
corporate Tax Avoidance and firm value
The Review of Economics and Statistics, 2009Co-Authors: Mihir A Desai, Dhammika DharmapalaAbstract:Abstract Do corporate Tax Avoidance activities advance shareholder interests? This paper tests alternative theories of corporate Tax Avoidance using unexplained differences between income reported to capital markets and to Tax authorities. OLS estimates indicate that the effect of Tax Avoidance on firm value is a function of firm governance, as predicted by an agency perspective on corporate Tax Avoidance. Instrumental variables estimates based on exogenous changes in Tax regulations yield larger overall effects and reinforce the basic result, as do several robustness checks. The results suggest that the simple view of corporate Tax Avoidance as a transfer of resources from the state to shareholders is incomplete given the agency problems characterizing shareholder-manager relations.
-
corporate Tax Avoidance and high powered incentives
Journal of Financial Economics, 2006Co-Authors: Mihir A Desai, Dhammika DharmapalaAbstract:This paper analyzes the links between corporate Tax Avoidance, the growth of high-powered incentives for managers, and the structure of corporate governance. We develop and test a simple model that highlights the role of complementarities between Tax sheltering and managerial diversion in determining how high-powered incentives influence Tax sheltering decisions. The model generates the testable hypothesis that firm governance characteristics determine how incentive compensation changes sheltering decisions. In order to test the model, we construct an empirical measure of corporate Tax Avoidance - the component of the book-Tax gap not attributable to accounting accruals - and investigate the link between this measure of Tax Avoidance and incentive compensation. We find that, for the full sample of firms, increases in incentive compensation tend to reduce the level of Tax sheltering, suggesting a complementary relationship between diversion and sheltering. As predicted by the model, the relationship between incentive compensation and Tax sheltering is a function of a firm's corporate governance. Our results may help explain the growing cross-sectional variation among firms in their levels of Tax Avoidance, the undersheltering puzzle,' and why large book-Tax gaps are associated with subsequent negative abnormal returns.
-
corporate Tax Avoidance and high powered incentives
Journal of Financial Economics, 2006Co-Authors: Mihir A Desai, Dhammika DharmapalaAbstract:Abstract This paper analyzes the links between corporate Tax Avoidance and the growth of high-powered incentives for managers. A simple model demonstrates the role of feedback effects between Tax sheltering and managerial diversion in determining how high-powered incentives influence Tax sheltering decisions. A novel measure of corporate Tax Avoidance (the component of the book-Tax gap not attributable to accounting accruals) allows for an investigation of the link between Tax Avoidance and incentive compensation. Increases in incentive compensation tend to reduce the level of Tax sheltering, in a manner consistent with a complementary relationship between diversion and sheltering. In addition, this negative effect is driven primarily by firms with relatively weak governance arrangements, confirming a central prediction of the model. These results can help explain the growing cross-sectional variation among firms in their levels of Tax Avoidance, the undersheltering puzzle, and why large book-Tax gaps are associated with subsequent negative abnormal returns.
-
corporate Tax Avoidance and firm value
Social Science Research Network, 2005Co-Authors: Mihir A Desai, Dhammika DharmapalaAbstract:Do corporate Tax Avoidance activities advance shareholder interests? This paper tests alternative theories of corporate Tax Avoidance that yield distinct predictions on the valuation of corporate Tax Avoidance. Unexplained differences between income reported to capital markets and to Tax authorities are used to proxy for Tax Avoidance activity. These "book-Tax" gaps are shown to be larger when firms are alleged to be involved in Tax shelters. OLS estimates indicate that the average effect of Tax Avoidance on firm value is not significantly different from zero, but is positive for well-governed firms as predicted by an agency perspective on corporate Tax Avoidance. An exogenous change in Tax regulations that affected the ability of some firms to avoid Taxes is used to construct instruments for Tax Avoidance activity. The IV estimates yield larger overall effects and reinforce the basic result that higher quality firm governance leads to a larger effect of Tax Avoidance on firm value. The results are robust to a wide variety of tests for alternative explanations. Taken together, the results suggest that the simple view of corporate Tax Avoidance as a transfer of resources from the state to shareholders is incomplete given the agency problems characterizing shareholder-manager relations.
-
corporate Tax Avoidance and firm value
National Bureau of Economic Research, 2005Co-Authors: Mihir A Desai, Dhammika DharmapalaAbstract:How do investors value managerial actions designed solely to minimize corporate Tax obligations? Using a framework in which managers' Tax sheltering decisions are related to their ability to divert value, this paper predicts that the effect of Tax Avoidance on firm value should vary systematically with the strength of firm governance institutions. The empirical results indicate that the average effect of Tax Avoidance on firm value is not significantly different from zero; however, the effect is positive for well-governed firms as predicted. Coefficient estimates are consistent with an expected life of five years for the devices that generate these Tax savings for well-governed firms. Alternative explanations for the dependence of the valuation of the Tax Avoidance measure on firm governance do not appear to be consistent with the empirical results. The findings indicate that the simple view of corporate Tax Avoidance as a transfer of resources from the state to shareholders is incomplete, given the agency problems characterizing shareholder-manager relations.
Edward L Maydew - One of the best experts on this subject based on the ideXlab platform.
-
customer supplier relationships and corporate Tax Avoidance
Journal of Financial Economics, 2017Co-Authors: Ling Cen, Edward L Maydew, Liandong Zhang, Luo ZuoAbstract:Abstract We investigate whether firms in close customer–supplier relationships are better able to identify and implement Tax Avoidance strategies via supply chains. Consistent with our prediction, we find that both principal customers and their dependent suppliers avoid more Taxes than other firms. Further analysis suggests that principal customers and dependent suppliers likely engage in Tax strategies involving shifting profits to Tax haven subsidiaries. Moreover, Tax benefits appear to explain both principal customer firms’ and dependent supplier firms’ organizational decisions. Overall, our study provides evidence of the importance of Tax Avoidance as a source of gains from these relationships.
-
the reputational costs of Tax Avoidance
Contemporary Accounting Research, 2014Co-Authors: John Gallemore, Edward L Maydew, Jacob R ThornockAbstract:We investigate whether firms and their top executives bear reputational costs from engaging in aggressive Tax Avoidance activities. Prior literature has posited that reputational costs partially explain why so many firms apparently forgo the benefits of Tax Avoidance, the so-called “under-sheltering puzzle.” We employ a database of 118 firms that were subject to public scrutiny for having engaged in Tax shelters, representing the largest sample of publicly identified corporate Tax shelters analyzed to date. We examine the reputational costs that prior research has shown that firms and managers face in cases of alleged misconduct: increased CEO and CFO turnover, auditor turnover, lost sales, increased advertising costs, and decreased media reputation. Across a battery of tests, we find little evidence that firms or their top executives bear significant reputational costs as a result of being accused of engaging in Tax shelter activities. Moreover, we find no decrease in firms’ Tax Avoidance activities after being accused of Tax shelter activity. Finally, in tests of the capital market reaction to news of Tax shelter involvement, we find that negative event-period returns fully reverse within a few weeks of the public scrutiny, consistent with a temporary market penalty to Tax shelter news. In all, we conclude that there is little evidence of Tax shelter usage leading to reputational costs at the firm level.
-
the effects of executives on corporate Tax Avoidance
The Accounting Review, 2010Co-Authors: Scott D Dyreng, Michelle Hanlon, Edward L MaydewAbstract:ABSTRACT: This study investigates whether individual top executives have incremental effects on their firms’ Tax Avoidance that cannot be explained by characteristics of the firm. To identify executive effects on firms’ effective Tax rates, we construct a data set that tracks the movement of 908 executives across firms over time. Results indicate that individual executives play a significant role in determining the level of Tax Avoidance that firms undertake. The economic magnitude of the executive effects on Tax Avoidance is large. Moving between the top and bottom quartiles of executives results in approximately an 11 percent swing in GAAP effective Tax rates; thus, executive effects appear to be an important determinant in firms’ Tax Avoidance.
-
the effects of executives on corporate Tax Avoidance
2009Co-Authors: Scott D Dyreng, Michelle Hanlon, Edward L MaydewAbstract:This paper investigates whether individual top executives have incremental effects on their firms’ Tax Avoidance that cannot be explained by characteristics of the firm. To identify executive effects on firms’ effective Tax rates, we construct a dataset that tracks the movement of 908 executives across firms over time. The results indicate that individual executives play a significant role in determining the level of Tax Avoidance that firms undertake. The economic magnitude of the executive effects on Tax Avoidance is large. Moving between the top and bottom quartiles of executives results in approximately an eleven percent swing in GAAP effective Tax rates; thus, executive effects appear to be an important determinant in firms’ Tax Avoidance.
-
long run corporate Tax Avoidance
The Accounting Review, 2008Co-Authors: Scott D Dyreng, Michelle Hanlon, Edward L MaydewAbstract:We develop and describe a new measure of long‐run corporate Tax Avoidance that is based on the ability to pay a low amount of cash Taxes per dollar of pre‐Tax earnings over long time periods. We label this measure the “long‐run cash effective Tax rate.” We use the long‐run cash effective Tax rate to examine (1) the extent to which some firms are able to avoid Taxes over periods as long as ten years, and (2) how predictive one‐year Tax rates are for long‐run Tax Avoidance. In our sample of 2,077 firms, we find there is considerable cross‐sectional variation in Tax Avoidance. For example, approximately one‐fourth of our sample firms are able to maintain long‐run cash effective Tax rates below 20 percent, compared to a sample mean Tax rate of approximately 30 percent. We also find that annual cash effective Tax rates are not very good predictors of long‐run cash effective Tax rates and, thus, are not accurate proxies for long‐run Tax Avoidance. While there is some evidence of persistence in annual cash effec...
Dhammika Dharmapala - One of the best experts on this subject based on the ideXlab platform.
-
corporate Tax Avoidance and firm value
The Review of Economics and Statistics, 2009Co-Authors: Mihir A Desai, Dhammika DharmapalaAbstract:Abstract Do corporate Tax Avoidance activities advance shareholder interests? This paper tests alternative theories of corporate Tax Avoidance using unexplained differences between income reported to capital markets and to Tax authorities. OLS estimates indicate that the effect of Tax Avoidance on firm value is a function of firm governance, as predicted by an agency perspective on corporate Tax Avoidance. Instrumental variables estimates based on exogenous changes in Tax regulations yield larger overall effects and reinforce the basic result, as do several robustness checks. The results suggest that the simple view of corporate Tax Avoidance as a transfer of resources from the state to shareholders is incomplete given the agency problems characterizing shareholder-manager relations.
-
corporate Tax Avoidance and high powered incentives
Journal of Financial Economics, 2006Co-Authors: Mihir A Desai, Dhammika DharmapalaAbstract:This paper analyzes the links between corporate Tax Avoidance, the growth of high-powered incentives for managers, and the structure of corporate governance. We develop and test a simple model that highlights the role of complementarities between Tax sheltering and managerial diversion in determining how high-powered incentives influence Tax sheltering decisions. The model generates the testable hypothesis that firm governance characteristics determine how incentive compensation changes sheltering decisions. In order to test the model, we construct an empirical measure of corporate Tax Avoidance - the component of the book-Tax gap not attributable to accounting accruals - and investigate the link between this measure of Tax Avoidance and incentive compensation. We find that, for the full sample of firms, increases in incentive compensation tend to reduce the level of Tax sheltering, suggesting a complementary relationship between diversion and sheltering. As predicted by the model, the relationship between incentive compensation and Tax sheltering is a function of a firm's corporate governance. Our results may help explain the growing cross-sectional variation among firms in their levels of Tax Avoidance, the undersheltering puzzle,' and why large book-Tax gaps are associated with subsequent negative abnormal returns.
-
corporate Tax Avoidance and high powered incentives
Journal of Financial Economics, 2006Co-Authors: Mihir A Desai, Dhammika DharmapalaAbstract:Abstract This paper analyzes the links between corporate Tax Avoidance and the growth of high-powered incentives for managers. A simple model demonstrates the role of feedback effects between Tax sheltering and managerial diversion in determining how high-powered incentives influence Tax sheltering decisions. A novel measure of corporate Tax Avoidance (the component of the book-Tax gap not attributable to accounting accruals) allows for an investigation of the link between Tax Avoidance and incentive compensation. Increases in incentive compensation tend to reduce the level of Tax sheltering, in a manner consistent with a complementary relationship between diversion and sheltering. In addition, this negative effect is driven primarily by firms with relatively weak governance arrangements, confirming a central prediction of the model. These results can help explain the growing cross-sectional variation among firms in their levels of Tax Avoidance, the undersheltering puzzle, and why large book-Tax gaps are associated with subsequent negative abnormal returns.
-
corporate Tax Avoidance and firm value
Social Science Research Network, 2005Co-Authors: Mihir A Desai, Dhammika DharmapalaAbstract:Do corporate Tax Avoidance activities advance shareholder interests? This paper tests alternative theories of corporate Tax Avoidance that yield distinct predictions on the valuation of corporate Tax Avoidance. Unexplained differences between income reported to capital markets and to Tax authorities are used to proxy for Tax Avoidance activity. These "book-Tax" gaps are shown to be larger when firms are alleged to be involved in Tax shelters. OLS estimates indicate that the average effect of Tax Avoidance on firm value is not significantly different from zero, but is positive for well-governed firms as predicted by an agency perspective on corporate Tax Avoidance. An exogenous change in Tax regulations that affected the ability of some firms to avoid Taxes is used to construct instruments for Tax Avoidance activity. The IV estimates yield larger overall effects and reinforce the basic result that higher quality firm governance leads to a larger effect of Tax Avoidance on firm value. The results are robust to a wide variety of tests for alternative explanations. Taken together, the results suggest that the simple view of corporate Tax Avoidance as a transfer of resources from the state to shareholders is incomplete given the agency problems characterizing shareholder-manager relations.
-
corporate Tax Avoidance and firm value
National Bureau of Economic Research, 2005Co-Authors: Mihir A Desai, Dhammika DharmapalaAbstract:How do investors value managerial actions designed solely to minimize corporate Tax obligations? Using a framework in which managers' Tax sheltering decisions are related to their ability to divert value, this paper predicts that the effect of Tax Avoidance on firm value should vary systematically with the strength of firm governance institutions. The empirical results indicate that the average effect of Tax Avoidance on firm value is not significantly different from zero; however, the effect is positive for well-governed firms as predicted. Coefficient estimates are consistent with an expected life of five years for the devices that generate these Tax savings for well-governed firms. Alternative explanations for the dependence of the valuation of the Tax Avoidance measure on firm governance do not appear to be consistent with the empirical results. The findings indicate that the simple view of corporate Tax Avoidance as a transfer of resources from the state to shareholders is incomplete, given the agency problems characterizing shareholder-manager relations.
Ryan J Wilson - One of the best experts on this subject based on the ideXlab platform.
-
Tax uncertainty and incremental Tax Avoidance
The Accounting Review, 2019Co-Authors: David A Guenther, Ryan J WilsonAbstract:ABSTRACT We investigate whether Tax Avoidance becomes more uncertain as the rate of Tax Avoidance increases. We estimate a system of equations to demonstrate that as firms' preTax income increases,...
-
conforming Tax Avoidance and capital market pressure
The Accounting Review, 2019Co-Authors: Brad A Badertscher, Sharon P Katz, Sonja Olhoft Rego, Ryan J WilsonAbstract:ABSTRACT In this study, we develop a measure of corporate Tax Avoidance that reduces both financial and Taxable income, which we refer to as “book-Tax conforming” Tax Avoidance. We use simulation a...
-
dual class ownership and Tax Avoidance
The Accounting Review, 2014Co-Authors: Sean T Mcguire, Dechun Wang, Ryan J WilsonAbstract:ABSTRACT: This study investigates whether the agency conflicts inherent in a dual class ownership structure are associated with the level of firms' Tax Avoidance. Dual class ownership presents a unique agency problem because insiders control a majority of the votes of a firm despite having claims to a minority of the firm's cash flows. We examine the level of Tax Avoidance for a sample of dual class firms and find that the extent of Tax Avoidance declines as the difference between voting rights and cash flow rights increases. We also compare the level of Tax Avoidance of dual class firms to a sample of propensity matched single class firms and find that dual class firms engage in less Tax Avoidance as the wedge between insiders' voting rights and cash flow rights increases. These findings are consistent with dual class ownership entrenching managers and allowing them to perform at a suboptimal level. Data Availability: Data used in this study are available from public sources identified in the paper.
-
dual class ownership and Tax Avoidance
Social Science Research Network, 2011Co-Authors: Sean T Mcguire, Dechun Wang, Ryan J WilsonAbstract:This study investigates whether the agency conflicts inherent in a dual class ownership structure are associated with the level of firms’ Tax Avoidance. Dual class ownership presents a unique agency problem because insiders’ voting rights (i.e., insiders’ ability to control the firm) exceed their cash flow rights (i.e., insiders’ claim on the cash payouts of the firm). Thus, insiders control a majority of the votes of a firm despite having claims to a minority of the firm’s cash flows. We examine the levels of non-conforming and conforming Tax Avoidance for a sample of dual class firms. Among dual class firms, we find that the extent of non-conforming Tax Avoidance is declining as the difference between voting rights and cash flow rights increases. In addition, we find that the difference between voting rights and cash flow rights is associated with lower levels of conforming Tax planning among dual class firms. We also compare the level of Tax Avoidance of dual class firms to other publicly traded firms and find that dual class firms engage in lower levels of non-conforming and conforming Tax planning. These findings are consistent with the quiet life view, which suggests that when managers are insulated from takeover they avoid the costly effort associated with increased Tax planning activities.
Scott D Dyreng - One of the best experts on this subject based on the ideXlab platform.
-
the effects of executives on corporate Tax Avoidance
The Accounting Review, 2010Co-Authors: Scott D Dyreng, Michelle Hanlon, Edward L MaydewAbstract:ABSTRACT: This study investigates whether individual top executives have incremental effects on their firms’ Tax Avoidance that cannot be explained by characteristics of the firm. To identify executive effects on firms’ effective Tax rates, we construct a data set that tracks the movement of 908 executives across firms over time. Results indicate that individual executives play a significant role in determining the level of Tax Avoidance that firms undertake. The economic magnitude of the executive effects on Tax Avoidance is large. Moving between the top and bottom quartiles of executives results in approximately an 11 percent swing in GAAP effective Tax rates; thus, executive effects appear to be an important determinant in firms’ Tax Avoidance.
-
the effects of executives on corporate Tax Avoidance
2009Co-Authors: Scott D Dyreng, Michelle Hanlon, Edward L MaydewAbstract:This paper investigates whether individual top executives have incremental effects on their firms’ Tax Avoidance that cannot be explained by characteristics of the firm. To identify executive effects on firms’ effective Tax rates, we construct a dataset that tracks the movement of 908 executives across firms over time. The results indicate that individual executives play a significant role in determining the level of Tax Avoidance that firms undertake. The economic magnitude of the executive effects on Tax Avoidance is large. Moving between the top and bottom quartiles of executives results in approximately an eleven percent swing in GAAP effective Tax rates; thus, executive effects appear to be an important determinant in firms’ Tax Avoidance.
-
long run corporate Tax Avoidance
The Accounting Review, 2008Co-Authors: Scott D Dyreng, Michelle Hanlon, Edward L MaydewAbstract:We develop and describe a new measure of long‐run corporate Tax Avoidance that is based on the ability to pay a low amount of cash Taxes per dollar of pre‐Tax earnings over long time periods. We label this measure the “long‐run cash effective Tax rate.” We use the long‐run cash effective Tax rate to examine (1) the extent to which some firms are able to avoid Taxes over periods as long as ten years, and (2) how predictive one‐year Tax rates are for long‐run Tax Avoidance. In our sample of 2,077 firms, we find there is considerable cross‐sectional variation in Tax Avoidance. For example, approximately one‐fourth of our sample firms are able to maintain long‐run cash effective Tax rates below 20 percent, compared to a sample mean Tax rate of approximately 30 percent. We also find that annual cash effective Tax rates are not very good predictors of long‐run cash effective Tax rates and, thus, are not accurate proxies for long‐run Tax Avoidance. While there is some evidence of persistence in annual cash effec...
-
long run corporate Tax Avoidance
Social Science Research Network, 2007Co-Authors: Scott D Dyreng, Michelle Hanlon, Edward L MaydewAbstract:We develop and describe a new measure of long-run corporate Tax Avoidance that is based on the ability to pay a low amount of cash Taxes per dollar of pre-Tax earnings over long time periods. We label this measure the long-run cash effective Tax rate. We use the long-run cash effective Tax rate to examine 1) the extent to which some firms are able to avoid Taxes over periods as long as ten years, and 2) how predictive one-year Tax rates are for long-run Tax Avoidance. In our sample of 2,077 firms, we find there is considerable cross-sectional variation in Tax Avoidance. For example, approximately one-fourth of our sample firms are able to maintain long-run cash effective Tax rates below 20 percent, compared to a sample mean Tax rate of approximately 30 percent. We also find that annual cash effective Tax rates are not very good predictors of long-run cash effective Tax rates and thus, are not accurate proxies for long-run Tax Avoidance. While there is some evidence of persistence in annual cash effective Tax rates, the persistence is asymmetric. Low annual cash effective Tax rates are more persistent than are high annual cash effective Tax rates. An initial examination of characteristics of firms successful at keeping their cash effective Tax rates low over long periods shows that they are well spread across industries but with some clustering.
