Abstract

http://ssrn.com/abstract=2374016
 


 



Investor Valuation of Tax Avoidance and the Uncertainty of Tax Outcomes: Evidence from the Pre- and Post-FIN 48 Periods


Katharine D. Drake


University of Arizona - Department of Accounting

Stephen J. Lusch


University of Notre Dame - Moreau Seminary

James Stekelberg


University of Arizona - Department of Accounting

August 8, 2014


Abstract:     
We examine whether investor valuation of tax avoidance is contingent upon the uncertainty of the firm’s tax outcomes. Additionally, we test whether the valuation of tax avoidance and tax uncertainty changes from the pre- to post-FIN 48 periods with the availability of new disclosures related to uncertain tax positions. Our results suggest that investors positively value tax avoidance; however, greater tax uncertainty moderates this relationship. Further, in the post-FIN 48 period we find that disclosures regarding uncertain tax positions are informative to investors and are generally used for valuation incremental to the information previously available about tax avoidance and tax uncertainty in the financial statements. The results of our study suggest that tax avoidance and the uncertainty of tax outcomes are not independent and should be considered jointly rather than in isolation.

Number of Pages in PDF File: 45

Keywords: corporate tax avoidance, tax risk, uncertain tax positions, firm valuation

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Date posted: January 3, 2014 ; Last revised: August 12, 2014

Suggested Citation

Drake, Katharine D. and Lusch, Stephen J. and Stekelberg, James, Investor Valuation of Tax Avoidance and the Uncertainty of Tax Outcomes: Evidence from the Pre- and Post-FIN 48 Periods (August 8, 2014). 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 Notre Dame - Moreau Seminary ( email )
Notre Dame, IN 46556
United States
James Stekelberg (Contact Author)
University of Arizona - Department of Accounting ( email )
Tucson, AZ 85721
United States
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