Conforming Tax Avoidance and Capital Market Pressure

• 成果类型: Article
• 署名作者: Badertscher, Brad A.; Katz, Sharon P.; Rego, Sonja Olhoft; Wilson, Ryan J.
• 署名单位: University of Notre Dame; INSEAD Business School; Indiana University System; Indiana University Bloomington; University of Oregon
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/accr-52359
• 发表日期: 2019
• 页码: 1-30
• 关键词: earnings management; valuation allowance; FIRMS; OWNERSHIP; rewards; CHOICE; COSTS; LIFO

摘要

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 analyses, LIFO/FIFO inventory method conversions, and samples of private and public firms to validate our measure. We then investigate the prevalence of conforming tax avoidance within a sample of public firms. Results from the validation tests indicate that our measure of conforming tax avoidance successfully captures book-tax conforming transactions. Consistent with expectations, we also find that the extent to which public firms engage in conforming tax avoidance varies systematically with the capital market pressures. Our study develops a new measure of conforming tax avoidance that should be useful in future research and provides new insights on the extent to which public firms are willing to reduce income tax liabilities at the expense of reporting lower financial income.