News Media Coverage of Corporate Tax Avoidance and Corporate Tax Reporting
49 Pages Posted: 8 May 2015
Date Written: 2015
Drawing upon media agenda-setting theory and previous studies in organizational impression management, this paper empirically investigates the influence of tax avoidance news on corporate tax reporting. This study is based on the pronounced discontinuity in the amount of news articles related to tax avoidance in the United Kingdom over two periods (2010-2011 and 2012-2013). A difference-in-differences design is employed in order to enable a comparison of the media effects on those firms that have been reported in tax avoidance news versus those without media attention. Using a sample of annual reports of UK FTSE 100 companies across the period 2010 to 2013, I test the impact of tax avoidance news on quality and quantity of tax disclosure. The results suggest that the recent increase in media attention on tax avoidance does not stimulate firms to improve the quality and the quantity of tax disclosure in their corporate reporting. Rather, firms can be discouraged from discussing the most relevant tax items in their reporting, as shown in the case of financial firms which were the subject of the largest amount of tax avoidance news.
Keywords: tax avoidance, income tax disclosure, impression management
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