Do Intangible Assets Foster Corporate Tax Avoidance?
58 Pages Posted: 26 Mar 2021
Date Written: March 18, 2021
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: Suggested Citation