How Does Quasi-Indexer Ownership Affect Corporate Tax-Planning?

54 Pages Posted: 27 May 2015 Last revised: 4 Jun 2018

See all articles by Shuping Chen

Shuping Chen

University of Texas at Austin - Red McCombs School of Business

Ying Huang

University of Texas at Dallas

Ningzhong Li

University of Texas at Dallas

Terry J. Shevlin

University of California-Irvine

Date Written: May 15, 2018

Abstract

Appendix is available at: https://ssrn.com/abstract=3182601

We study whether, and more importantly, through what mechanisms, quasi-indexers affect portfolio firms’ tax planning by employing the discontinuity in quasi-indexer ownership around the Russell 1000/2000 index cutoff. Using a regression discontinuity design, we find that higher quasi-indexer ownership leads to greater tax saving. With respect to the mechanisms, we find that the greater tax saving is a result of a focus on improved overall firm performance, not a specific focus on improved tax planning. We further find that the documented tax saving effect is partially due to quasi-indexers’ influences on executive equity incentives, corporate governance, and information environment.

Keywords: tax planning; quasi-indexer; Russell Index assignment; regression discontinuity

JEL Classification: G32, H26

Suggested Citation

Chen, Shuping and Huang, Ying and Li, Ningzhong and Shevlin, Terry J., How Does Quasi-Indexer Ownership Affect Corporate Tax-Planning? (May 15, 2018). Journal of Accounting & Economics (JAE), Forthcoming. Available at SSRN: https://ssrn.com/abstract=2610826 or http://dx.doi.org/10.2139/ssrn.2610826

Shuping Chen

University of Texas at Austin - Red McCombs School of Business ( email )

Austin, TX 78712
United States
521.471.5328 (Phone)

Ying Huang

University of Texas at Dallas ( email )

2601 North Floyd Road
Richardson, TX 75083
United States

Ningzhong Li (Contact Author)

University of Texas at Dallas ( email )

2601 North Floyd Road
Richardson, TX 75083
United States

Terry J. Shevlin

University of California-Irvine ( email )

Irvine, CA California 92697-3125
United States
2065509891 (Phone)

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