Abstract

http://ssrn.com/abstract=2409688
 


 



Are 'Tax Aggressive' Firms Just Inflating Earnings?


David A. Guenther


University of Oregon - Department of Accounting

Linda K. Krull


University of Oregon

Brian M. Williams


University of Oregon

March 15, 2014


Abstract:     
We investigate whether low Cash ETRs are associated with two distinct effects — tax avoidance and low earnings quality — and if so, whether the two effects can be separated. Separating these effects is important: if upward earnings management is driving low Cash ETRs, inferences based on tax avoidance may not be valid. Our results demonstrate Cash ETRs are associated with both earnings quality and tax avoidance. We test an alternative measure, the ratio of cash taxes paid to pretax operating cash flows, and provide evidence that this measure mitigates the association with earnings quality while retaining the association with tax avoidance.

Number of Pages in PDF File: 44

Keywords: tax avoidance, earnings management, crash risk

JEL Classification: M41, H25, G12

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Date posted: March 17, 2014  

Suggested Citation

Guenther, David A. and Krull, Linda K. and Williams, Brian M., Are 'Tax Aggressive' Firms Just Inflating Earnings? (March 15, 2014). Available at SSRN: http://ssrn.com/abstract=2409688 or http://dx.doi.org/10.2139/ssrn.2409688

Contact Information

David A. Guenther (Contact Author)
University of Oregon - Department of Accounting ( email )
Lundquist College of Business
1208 University of Oregon
Eugene, OR 97403
United States
541-346-5384 (Phone)
Linda K. Krull
University of Oregon ( email )
1208 University of Oregon
Eugene, OR 97403-1208
United States
541-346-3252 (Phone)
Brian M. Williams
University of Oregon ( email )
1280 University of Oregon
Eugene, OR 97403
United States
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