Corporate Tax Avoidance and Mutual Fund Ownership

Accounting and Business Research, 2020, Forthcoming

40 Pages Posted: 3 Mar 2020

See all articles by Thomas W. Doellman

Thomas W. Doellman

Saint Louis University - Richard A. Chaifetz School of Business

Fariz Huseynov

North Dakota State University - College of Business

Tareque Nasser

Kansas State University

Sabuhi Sardarli

Kansas State University - Department of Finance

Date Written: February 3, 2020

Abstract

We document evidence that mutual funds, on average, are averse to investing in tax-avoiding firms, which seems anomalous given the potential for two likely motives. Mutual fund managers’ compensation incentives may lead them to prefer tax-avoiding firms, or the fact that mutual funds are well-diversified may lead to managers’ indifference. A less obvious motive, and one consistent with our results, is that mutual funds focus on decreasing their tax information processing costs. Our results remain similar when we address endogeneity concerns using several methods, including difference-in-differences and matching methodologies, and after running numerous robustness checks.

Keywords: Tax Avoidance, Mutual Fund, Tax Risk, Institutional Investor

JEL Classification: G11, G23, G30, H25, H26

Suggested Citation

Doellman, Thomas W. and Huseynov, Fariz and Nasser, Tareque and Sardarli, Sabuhi, Corporate Tax Avoidance and Mutual Fund Ownership (February 3, 2020). Accounting and Business Research, 2020, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3531188 or http://dx.doi.org/10.2139/ssrn.3531188

Thomas W. Doellman

Saint Louis University - Richard A. Chaifetz School of Business ( email )

3674 Lindell Blvd
St. Louis, MO 63108-3397
United States

Fariz Huseynov

North Dakota State University - College of Business ( email )

Department of Acctg, Finance & Information Systems
Fargo, ND 58108
United States
+17012315074 (Phone)

Tareque Nasser (Contact Author)

Kansas State University ( email )

Department of Finance
2097 BB, 1301 Lovers Lane
Manhattan, KS 66506
United States
(785) 532-4375 (Phone)
(785) 532-6822 (Fax)

HOME PAGE: http://https://cba.k-state.edu/faculty-staff/directory/Nasser-Tareque.html

Sabuhi Sardarli

Kansas State University - Department of Finance ( email )

Manhattan, KS 66506
United States

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