Do Property Taxes Affect Real Operating Decisions and Market Prices for Crude Oil?

Posted: 14 Dec 2011 Last revised: 14 May 2014

See all articles by Kristian D. Allee

Kristian D. Allee

University of Arkansas - Department of Accounting

Dan Lynch

University of Wisconsin - Madison - Department of Accounting and Information Systems

Kathy R. Petroni

Michigan State University - Eli Broad College of Business and Eli Broad Graduate School of Management

Joseph H. Schroeder

Indiana University - Kelley School of Business - Department of Accounting

Multiple version iconThere are 2 versions of this paper

Date Written: September 24, 2013

Abstract

This study investigates the effect of personal property taxes on real business decisions. Consistent with tax avoidance, we posit that personal property taxes are associated with decreases (increases) in inventory prior to (following) assessment dates. We empirically test this prediction using monthly crude oil inventory data. We find that in locations where crude oil inventory is subject to taxation, total and refinery-level crude oil inventories are reduced prior to assessment dates and increased in the following period, when compared to locations with no tax. The results provide empirical evidence that personal property taxes play a role in the operating decisions of firms. We also examine the pricing implications of these tax driven changes in crude oil inventory and find that the market seemingly adjusts crude oil prices around assessment dates demonstrating that the market acts as if it understands these changes in crude oil inventory are not simply due to supply and demand effects.

Keywords: non-income taxes, real activities management, property taxes, crude oil, inventory

JEL Classification: H25, H71, M48, M49

Suggested Citation

Allee, Kristian D. and Lynch, Dan and Petroni, Kathy Ruby and Schroeder, Joseph H., Do Property Taxes Affect Real Operating Decisions and Market Prices for Crude Oil? (September 24, 2013). Contemporary Accounting Research, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1971856 or http://dx.doi.org/10.2139/ssrn.1971856

Kristian D. Allee (Contact Author)

University of Arkansas - Department of Accounting ( email )

University of Arkansas
Business Building 458
Fayetteville, AR 72701
United States
479-575-5227 (Phone)

Dan Lynch

University of Wisconsin - Madison - Department of Accounting and Information Systems ( email )

School of Business
975 University Avenue
Madison, WI 53706
United States

Kathy Ruby Petroni

Michigan State University - Eli Broad College of Business and Eli Broad Graduate School of Management ( email )

East Lansing, MI 48824-1121
United States
517-432-2924 (Phone)
517-432-1101 (Fax)

Joseph H. Schroeder

Indiana University - Kelley School of Business - Department of Accounting ( email )

1309 E. 10th Street
Bloomington, IN 47405
United States

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