Financial Accounting Effects of Tax Aggressiveness: Contracting and Measurement

46 Pages Posted: 25 Oct 2010 Last revised: 17 Apr 2013

Anja De Waegenaere

Tilburg University - Center for Economic Research (CentER)

Richard C. Sansing

Tuck School of Business at Dartmouth

J. Wielhouwer

VU University Amsterdam

Date Written: April 2, 2013

Abstract

This study examines a setting in which a tax reporting decision is delegated to a …firm’'s tax manager. Using financial accounting measures of tax expense to evaluate the tax manager allows the fi…rm to efficiently attain the level of tax avoidance it prefers, despite the fact that the consequences of the tax reporting decision will occur in the future. The study also examines how well two accounting measures of tax aggressiveness -- –cash taxes paid and the unrecognized tax bene…fit -- distinguish between conservative and aggressive fi…rms.

Keywords: FIN 48, tax reporting, contracting, unrecognized tax benefits, book income tax expense

JEL Classification: H25, M41

Suggested Citation

De Waegenaere, Anja and Sansing, Richard C. and Wielhouwer, J., Financial Accounting Effects of Tax Aggressiveness: Contracting and Measurement (April 2, 2013). Tuck School of Business Working Paper No. 2010-83. Available at SSRN: https://ssrn.com/abstract=1697536 or http://dx.doi.org/10.2139/ssrn.1697536

Anja M.B. De Waegenaere

Tilburg University - Center for Economic Research (CentER) ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Richard C. Sansing (Contact Author)

Tuck School of Business at Dartmouth ( email )

100 Tuck Hall
Hanover, NH 03755
United States
603-646-0392 (Phone)
603-646-1308 (Fax)

Jacco L. Wielhouwer

VU University Amsterdam ( email )

De Boelelaan 1105
Amsterdam, 1081HV
Netherlands

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