Tax Knowledge Diffusion via Strategic Alliances

58 Pages Posted: 13 Feb 2020 Last revised: 1 Feb 2023

See all articles by Jens Mueller

Jens Mueller

Paderborn University

Arndt Weinrich

Paderborn University; TRR 266 Accounting for Transparency

Date Written: February 5, 2020

Abstract

We utilize the characteristics of tax knowledge, knowledge diffusion processes, and strategic alliances’ institutionalization to examine whether strategic alliances serve as channels for tax knowledge diffusion between firms. We empirically identify tax knowledge diffusion via strategic alliances by documenting economically meaningful decreases in cash effective tax rates of high-tax firms in strategic alliances with low-tax firms relative to high-tax firms in strategic alliances with other high-tax firms. We identify dynamic treatment effects and find that elapsed time is an important facilitating mechanism of tax knowledge diffusion. Furthermore, we show that geographical proximity, identical industry affiliation, and shared audit firm serve as substitutes rather than as complements for strategic alliances to low-tax firms. Finally, we triangulate our findings to effects on the textual sentiment of 10-K filings and the disclosure of tax haven operations. Overall, our results provide robust evidence for tax knowledge diffusion via strategic alliances.

Keywords: Corporate Tax Planning/Avoidance, Knowledge Diffusion, Network, Strategic Alliance

JEL Classification: C31, G34, H26

Suggested Citation

Mueller, Jens and Weinrich, Arndt, Tax Knowledge Diffusion via Strategic Alliances (February 5, 2020). TRR 266 Accounting for Transparency Working Paper Series No. 17, Available at SSRN: https://ssrn.com/abstract=3532367 or http://dx.doi.org/10.2139/ssrn.3532367

Jens Mueller

Paderborn University ( email )

Warburger Str. 100
Paderborn, 33098
Germany

Arndt Weinrich (Contact Author)

Paderborn University ( email )

Warburger Str. 100
Paderborn, 33098
Germany

TRR 266 Accounting for Transparency ( email )

Warburger Straße 100
Paderborn, 33098
Germany

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