Institutional Shareholders’ Investment Horizons and Tax Avoidance

40 Pages Posted: 27 Sep 2012

See all articles by Inder K. Khurana

Inder K. Khurana

University of Missouri at Columbia - Robert J. Trulaske, Sr. College of Business

William J. Moser

Miami University

Date Written: September 27, 2012

Abstract

We investigate whether the level of ownership by institutional shareholders with a long-term horizon is associated with firms’ tax avoidance activities. In theory, tax avoidance increases firm value through tax savings; however, institutions with long-term investment horizons are likely to discourage tax avoidance activities if such activities encourage managerial opportunism and reduce transparency. Using a sample of firms with institutional ownership data from 1995-2008, we find less tax avoidance in firms held by long-term institutional shareholders. Probing further, we find these results are generally driven by poorly-governed firms. Overall, our results highlight the role of certain types of institutional shareholders in affecting a firm’s tax avoidance behavior.

Suggested Citation

Khurana, Inder and Moser, William J., Institutional Shareholders’ Investment Horizons and Tax Avoidance (September 27, 2012). Available at SSRN: https://ssrn.com/abstract=2153188 or http://dx.doi.org/10.2139/ssrn.2153188

Inder Khurana (Contact Author)

University of Missouri at Columbia - Robert J. Trulaske, Sr. College of Business ( email )

331 Cornell Hall
Columbia, MO 65211
United States
573-882-3474 (Phone)
573-882-2437 (Fax)

William J. Moser

Miami University ( email )

2027 Farmer School of Business
800 East High Street
Oxford, OH 45056
United States
513-529-8284 (Phone)

Register to save articles to
your library

Register

Paper statistics

Downloads
427
rank
65,974
Abstract Views
2,024
PlumX Metrics