The economic effects of financial derivatives on corporate tax avoidance

• 成果类型: Article
• 署名作者: Donohoe, Michael P.
• 署名单位: 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.2014.11.001
• 发表日期: 2015
• 关键词: propensity score; RISK-MANAGEMENT; earnings; income; determinants; incentives; INVESTMENT; FIRMS; debt; US

摘要

This study estimates the corporate tax savings from financial derivatives. I document a 3.6 and 4.4 percentage point reduction in three-year current and cash effective tax rates (ETRs), respectively, after a firm initiates a derivatives program. The decline in cash ETR equates to $10.69 million in tax savings for the average firm and $4.0 billion for the entire sample of 375 new derivatives users. Of these amounts, $8.75 million and $3.3 billion, respectively, are incremental to tax savings that theory suggests are a byproduct of risk management. Collectively, these findings provide economic insight into the prevalence of derivatives-based tax avoidance. (C) 2014 Elsevier B.V. All rights reserved.