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http://ssrn.com/abstract=2184892
 
 

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Corporate Transparency, Sustainable Tax Strategies, and Uncertain Tax Activities


Stevanie S. Neuman


University of Missouri at Columbia - School of Accountancy

Thomas C. Omer


University of Nebraska at Lincoln - School of Accountancy

Marjorie K. Shelley


University of Nebraska at Lincoln - School of Accountancy

March 20, 2013


Abstract:     
We investigate whether the sustainability of firms’ tax strategies is associated with corporate transparency. We expect and find that firms with sustainable tax strategies are associated with more transparent information environments. Prior research shows that transparency is associated with better governance; we expect better governed firms to engage in more sustainable tax strategies and we find that firms with more sustainable tax strategies exhibit significantly higher return on assets, free cash flows and cash flows from operations, and higher Altman’s Z-Scores. We also find that the likelihood of engaging in uncertain tax activities is negatively related to both transparency and tax strategy sustainability. Finally, we find that firms with lower transparency record higher unrecognized tax benefits. These relationships are important because a firm’s degree of transparency significantly affects capital costs and value, and relying on the assumption that tax planning investments lead to more obscure information environments can be costly.

Number of Pages in PDF File: 60

Keywords: corporate transparency, sustainable tax strategies, uncertain tax activities

JEL Classification: M40, M41, M49

working papers series


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Date posted: December 4, 2012 ; Last revised: March 23, 2013

Suggested Citation

Neuman, Stevanie S. and Omer, Thomas C. and Shelley, Marjorie K., Corporate Transparency, Sustainable Tax Strategies, and Uncertain Tax Activities (March 20, 2013). Available at SSRN: http://ssrn.com/abstract=2184892 or http://dx.doi.org/10.2139/ssrn.2184892

Contact Information

Stevanie S. Neuman (Contact Author)
University of Missouri at Columbia - School of Accountancy ( email )
College of Business
Columbia, MO 65211
United States
Thomas C. Omer
University of Nebraska at Lincoln - School of Accountancy ( email )
307 College of Business Administration
Lincoln, NE 68588-0488
United States
Marjorie Shelley
University of Nebraska at Lincoln - School of Accountancy ( email )
307 College of Business Administration
Lincoln, NE 68588-0488
United States
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