The Value Relevance of Taxes: International Evidence on the Proxy for Profitability Role of Tax Surprise

Posted: 26 Mar 2016 Last revised: 6 Nov 2018

See all articles by Jon N. Kerr

Jon N. Kerr

Ohio State University (OSU) - Department of Accounting & Management Information Systems

Date Written: March 24, 2016

Abstract

Despite evidence in the United States that tax surprise is incrementally value relevant, the literature has done little to examine those circumstances that enhance or diminish that value relevance, or broaden the investigation to settings beyond the United States. I examine whether tax enforcement has a bearing on the incremental value relevance of tax surprise for a broad cross-country sample of firms. I also extend the evidence on the incremental value relevance of tax surprise to the international setting. I report strong results that tax surprise has greater incremental value relevance when tax enforcement is high, with results suggesting that the value relevance of tax surprise is mostly contained within its interaction with tax enforcement. Overall, these findings highlight the importance of tax enforcement for tax surprise as a proxy for profitability and suggest that extant and future discussions should be broadened to include this important variable.

Keywords: Value Relevance, Tax Surprise, Tax Enforcement, International

JEL Classification: M41

Suggested Citation

Kerr, Jon N., The Value Relevance of Taxes: International Evidence on the Proxy for Profitability Role of Tax Surprise (March 24, 2016). Journal of Accounting & Economics (JAE), Forthcoming, Available at SSRN: https://ssrn.com/abstract=2754346 or http://dx.doi.org/10.2139/ssrn.2754346

Jon N. Kerr (Contact Author)

Ohio State University (OSU) - Department of Accounting & Management Information Systems ( email )

2100 Neil Avenue
Columbus, OH 43210
United States
614-292-2698 (Phone)

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
1,239
PlumX Metrics