Do Intangible Assets Foster Corporate Tax Avoidance?

58 Pages Posted: 26 Mar 2021

See all articles by Kai Wu

Kai Wu

Central University of Finance and Economics (CUFE) - School of Finance

Weimian Ai

Central University of Finance and Economics

Date Written: March 18, 2021

Abstract

Although existing studies have documented ample evidence that intangible assets can foster corporate tax avoidance, they mainly focus on the scale of intangible assets, whereas the productivity of intangible assets is not accounted. Using intangible intensity to measure both the scale and productivity of intangible assets, we find that intangible intensity is actually negatively associated with corporate tax avoidance for the U.S. listed firms from 1985 to 2017. The decomposition of intangible intensity identifies goodwill as the driving force in this negative relationship. Moreover, we find firm productivity is the mediating channel in the relationship between intangible assets and corporate tax avoidance. The negative association is more pronounced in firms with low CEO pay-performance sensitivity, less corporate diversification, and a lack of foreign revenues. Overall, our findings suggest that intangible asset productivity plays a critical role in corporate tax policies.

Keywords: intangible assets; firm productivity; tax avoidance

JEL Classification: G34, E22, H26

Suggested Citation

Wu, Kai and Ai, Weimian, Do Intangible Assets Foster Corporate Tax Avoidance? (March 18, 2021). Available at SSRN: https://ssrn.com/abstract=3811955 or http://dx.doi.org/10.2139/ssrn.3811955

Kai Wu (Contact Author)

Central University of Finance and Economics (CUFE) - School of Finance ( email )

Beijing
China

Weimian Ai

Central University of Finance and Economics ( email )

Beijing
China

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