Abstract

http://ssrn.com/abstract=2374016
 


 



Investor Valuation of Tax Avoidance and the Volatility of Tax Outcomes


Katharine D. Drake


University of Arizona - Department of Accounting

Stephen J. Lusch


University of Arizona - Department of Accounting

James Stekelberg


University of Arizona - Department of Accounting

February 16, 2015


Abstract:     
We examine whether investor valuation of corporate tax avoidance is contingent upon the volatility of the firm’s tax outcomes. Our results suggest that investors positively value tax avoidance; however, greater tax volatility moderates this relationship. We also find that contemporaneous measures of tax avoidance and volatility are significant determinants of future tax avoidance and volatility, suggesting that investors appropriately use these measures to update their expectations of future tax-related cash flows. Broadly, the results of our study provide evidence on an important cross-sectional determinant of the valuation of corporate tax avoidance and suggest that tax avoidance and the volatility of tax outcomes are not independent and should be considered jointly rather than in isolation.

Number of Pages in PDF File: 46

Keywords: corporate tax avoidance, tax rate volatility, uncertain tax positions, firm valuation


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Date posted: January 3, 2014 ; Last revised: February 17, 2015

Suggested Citation

Drake, Katharine D. and Lusch, Stephen J. and Stekelberg, James, Investor Valuation of Tax Avoidance and the Volatility of Tax Outcomes (February 16, 2015). Available at SSRN: http://ssrn.com/abstract=2374016 or http://dx.doi.org/10.2139/ssrn.2374016

Contact Information

Katharine D. Drake
University of Arizona - Department of Accounting ( email )
Tucson, AZ 85721
United States
Stephen J. Lusch
University of Arizona - Department of Accounting ( email )
Tucson, AZ 85721
United States
James Stekelberg (Contact Author)
University of Arizona - Department of Accounting ( email )
Tucson, AZ 85721
United States
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