Firm Valuation and the Uncertainty of Future Tax Avoidance

Forthcoming, European Accounting Review

50 Pages Posted: 30 Oct 2013 Last revised: 10 Jul 2019

See all articles by Martin Jacob

Martin Jacob

WHU - Otto Beisheim School of Management

Harm H. Schütt

Tilburg University - Tilburg School of Economics and Management

Date Written: July 8, 2019

Abstract

Using a valuation framework, we show that two dimensions of tax avoidance, uncertainty and the level of expected future tax rates, are jointly related to firm value and need to be expressed as a ratio. We confirm the importance of a composite measure of tax avoidance adjusted for tax uncertainty in our empirical tests based on a sample of U.S. firms. Our findings indicate that shareholders jointly consider the level and uncertainty of future tax avoidance when valuing firms.

Keywords: firm valuation, tax avoidance, tax uncertainty

JEL Classification: M41, G12, H25

Suggested Citation

Jacob, Martin and Schütt, Harm H., Firm Valuation and the Uncertainty of Future Tax Avoidance (July 8, 2019). Forthcoming, European Accounting Review. Available at SSRN: https://ssrn.com/abstract=2347330 or http://dx.doi.org/10.2139/ssrn.2347330

Martin Jacob (Contact Author)

WHU - Otto Beisheim School of Management ( email )

Burgplatz 2
D-56179 Vallendar, 56179
Germany

HOME PAGE: http://www.whu.edu/steuer

Harm H. Schütt

Tilburg University - Tilburg School of Economics and Management ( email )

PO Box 90153
Tilburg, 5000 LE Ti
Netherlands

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