The Effect of Hedge Fund Activism on Corporate Tax Avoidance

• 成果类型: Article
• 署名作者: Cheng, C. S. Agnes; Huang, Henry He; Li, Yinghua; Stanfield, Jason
• 署名单位: Hong Kong Polytechnic University; Louisiana State University System; Louisiana State University; Texas A&M University System; Prairie View A&M University; University of Houston System; University of Houston; City University of New York (CUNY) System; Baruch College (CUNY); Purdue University System; Purdue University
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/accr-50195
• 发表日期: 2012
• 页码: 1493-1526
• 关键词: SHAREHOLDER ACTIVISM; Aggressiveness; governance; shelters; accruals

摘要

This paper examines the impact of hedge fund activism on corporate tax avoidance. We find that relative to matched control firms, businesses targeted by hedge fund activists exhibit lower tax avoidance levels prior to hedge fund intervention, but experience increases in tax avoidance after the intervention. Moreover, findings suggest that the increase in tax avoidance is greater when activists have a successful track record of implementing tax changes and possess tax interest or knowledge as indicated by their Securities and Exchange Commission (SEC) 13D filings. We also find that these greater tax savings do not appear to result from an increased use of high-risk and potentially illegal tax strategies, such as sheltering. Taken together, the results suggest that shareholder monitoring of firms, in the form of hedge fund activism, improves tax efficiency.