Product Market Power and Tax Avoidance: Market Leaders, Mimicking Strategies, and Stock Returns

• 成果类型: Article
• 署名作者: Kubick, Thomas R.; Lynch, Daniel P.; Mayberry, Michael A.; Omer, Thomas C.
• 署名单位: University of Kansas; University of Wisconsin System; University of Wisconsin Madison; State University System of Florida; University of Florida; University of Nebraska System; University of Nebraska Lincoln
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/accr-50883
• 发表日期: 2015
• 页码: 675-702
• 关键词: industry concentration; cross-section; COMPETITION; Aggressiveness; investments; volatility; pressure; COSTS

摘要

Product market power provides firms with comparative advantages through more persistent profitability and insulation from competitive threats. These advantages likely provide firms with the ability to engage in greater tax avoidance. We present evidence consistent with this hypothesis. We also show that firms mimic the tax outcomes of their product market leaders. Among firms with greater product market power and comparatively high cash tax avoidance, we find stock prices to be less informative and that investors require additional compensation for the risks associated with comparatively high cash tax avoidance. Our results survive numerous robustness tests. Overall, our results suggest that industry dynamics, particularly related to a firm's competitive position, play a meaningful role in corporate tax policy.