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http://ssrn.com/abstract=2021157
 
 

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Tax Avoidance and Geographic Earnings Disclosure


Ole-Kristian Hope


University of Toronto - Rotman School of Management

Mark (Shuai) Ma


American University - Accounting

Wayne B. Thomas


University of Oklahoma - Michael F. Price College of Business

May 28, 2013


Abstract:     
This study tests the relation between corporate tax avoidance and disclosure of geographic earnings for U.S. multinational companies. We find that after the adoption of Statement of Financial Accounting Standards No. 131 in 1998, firms opting to discontinue disclosure of geographic earnings in their financial reports have lower worldwide effective tax rates. These results are consistent with managers perceiving that non-disclosure of geographic earnings helps mask tax avoidance behavior. However, the relation between tax avoidance and non-disclosure reduces after implementation of Schedule M-3 in the annual corporate tax filing beginning in 2004. Schedule M-3 requires a detailed reconciliation of book income to tax income and aims to make firms’ tax avoidance activities associated with shifting profits to lower-tax foreign jurisdictions more apparent to the IRS. This study contributes to our understanding of the relation between financial reporting behavior and tax reporting behavior.

Number of Pages in PDF File: 54

Keywords: Tax Avoidance, Geographic Earnings Disclosure, SFAS 131, Schedule M-3, Research Design

JEL Classification: E62, F30, G30, G34, G38, H25, H26, M41

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Date posted: March 14, 2012 ; Last revised: May 28, 2013

Suggested Citation

Hope, Ole-Kristian and Ma, Mark (Shuai) and Thomas, Wayne B., Tax Avoidance and Geographic Earnings Disclosure (May 28, 2013). Available at SSRN: http://ssrn.com/abstract=2021157 or http://dx.doi.org/10.2139/ssrn.2021157

Contact Information

Ole-Kristian Hope (Contact Author)
University of Toronto - Rotman School of Management ( email )
105 St. George Street
Toronto, Ontario M5S 3E6
Canada
HOME PAGE: http://www.rotman.utoronto.ca/FacultyAndResearch/Faculty/FacultyBios/Hope.aspx
Mark (Shuai) Ma
American University - Accounting ( email )
United States
Wayne B. Thomas
University of Oklahoma - Michael F. Price College of Business ( email )
Michael F. Price College of Business,
307 W Brooks, Rm 212B
Norman, OK 73019
United States
405-325-5789 (Phone)
405-325-7348 (Fax)
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