Abstract

http://ssrn.com/abstract=2153187
 
 

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Tax Avoidance and Firm Risk


David A. Guenther


University of Oregon - Department of Accounting

Steven R. Matsunaga


University of Oregon

Brian M. Williams


University of Oregon

December 2013


Abstract:     
Prior research has argued that corporate tax avoidance increases firm risk. To provide evidence on this association we investigate whether tax decisions impact firm risk and the extent to which empirical measures of the firm's tax avoidance reflect risky choices. We find that tax risk, as reflected in the volatility of the Cash ETR, is positively related to future total firm risk. This suggests that tax risk contributes to overall firm risk and that the volatility of the Cash ETR reflects tax rate uncertainty. We do not find evidence that either the level of Cash ETR or the UTB reserve is related to future firm risk. Therefore, our results do not support the notion implicit in several recently published studies and concurrent working papers that low Cash ETRs reflect the extent to which firms undertake risky tax positions, or the degree of uncertainty about future tax payments.

Number of Pages in PDF File: 38

Keywords: effective tax rates, unrecorded tax benefit, tax aggressiveness, tax risk

JEL Classification: M41

working papers series


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Date posted: September 27, 2012 ; Last revised: March 5, 2014

Suggested Citation

Guenther, David A. and Matsunaga, Steven R. and Williams, Brian M., Tax Avoidance and Firm Risk (December 2013). Available at SSRN: http://ssrn.com/abstract=2153187 or http://dx.doi.org/10.2139/ssrn.2153187

Contact Information

David A. Guenther
University of Oregon - Department of Accounting ( email )
Lundquist College of Business
1208 University of Oregon
Eugene, OR 97403
United States
541-346-5384 (Phone)
Steven R. Matsunaga (Contact Author)
University of Oregon ( email )
1280 University of Oregon
Eugene, OR 97403
United States
Brian M. Williams
University of Oregon ( email )
1280 University of Oregon
Eugene, OR 97403
United States
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