Investment Opportunity Sets, Operating Uncertainty, and Capital Market Pressure: Determinants of Investments in Tax Shelter Activities?

39 Pages Posted: 29 Jul 2011 Last revised: 26 Jun 2012

See all articles by Sean T. McGuire

Sean T. McGuire

Texas A&M University - Department of Accounting

Thomas C. Omer

University of Nebraska at Lincoln - School of Accountancy

Jaron H. Wilde

University of Iowa - Henry B. Tippie College of Business

Date Written: June 26, 2012

Abstract

This study examines whether factors that influence firms’ overall investment strategies also influence the decision to invest in a tax shelter. Our results suggest that firms with large investment opportunity sets are less likely to invest in tax shelters. We also find that firms with greater operating uncertainty are less likely to invest in tax shelters. Finally, we find that firms with greater capital market pressure are more likely to invest in tax sheltering activities. In combination, our evidence suggests that the likelihood that a firm will invest in tax sheltering activities is a function of its overall investment strategy.

Keywords: tax shelter, investment opportunity set, operating uncertainty, capital market expectations

JEL Classification: H25, H26, M41

Suggested Citation

McGuire, Sean T. and Omer, Thomas C. and Wilde, Jaron H., Investment Opportunity Sets, Operating Uncertainty, and Capital Market Pressure: Determinants of Investments in Tax Shelter Activities? (June 26, 2012). Available at SSRN: https://ssrn.com/abstract=1896585 or http://dx.doi.org/10.2139/ssrn.1896585

Sean T. McGuire (Contact Author)

Texas A&M University - Department of Accounting ( email )

430 Wehner
College Station, TX 77843-4353
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

Jaron H. Wilde

University of Iowa - Henry B. Tippie College of Business ( email )

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