A reexamination of investors' reaction to tax shelter news: Evidence from the Luxembourg tax leaks

• 成果类型: Article
• 署名作者: Nesbitt, Wayne L.; Outslay, Edmund; Persson, Anh V.
• 署名单位: Michigan State University; Michigan State University's Broad College of Business; University of Illinois System; University of Illinois Urbana-Champaign
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/j.jacceco.2022.101537
• 发表日期: 2023
• 关键词: AVOIDANCE; incentives; benefits; COSTS

摘要

This study examines the stock market reaction to the unprecedented leaks of confidential advance tax rulings between Luxembourg and multinational corporations-also known as the LuxLeaks. Contrary to the negative market reaction to tax shelter news documented in prior research, we find that investors responded positively to these leaks. This reaction is concentrated among U.S. firms. Furthermore, we document a positive association between abnormal returns and the reduction in firms' tax uncertainty, consistent with a downward revision in investors' perception of the tax uncertainty associated with the firms' Luxembourg operations. We also investigate other firm characteristics and find that, among U.S. firms, investors' reaction is weaker for those over-invested in tax avoidance. Among non-U.S. firms, the market response is muted by concerns about the quality of governance. In summary, our results suggest that investors' reaction to tax shelter news is conditional on their reassessment of the firms' tax uncertainty.(c) 2022 Elsevier B.V. All rights reserved.