Do Intangible Assets Really Foster Corporate Tax Avoidance?

55 Pages Posted: 26 Mar 2021 Last revised: 6 Oct 2022

See all articles by Kai Wu

Kai Wu

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

Weimian Ai

Einaudi Institute for Economics and Finance (EIEF); Luiss Guido Carli University

Yi Liu

Stevens Institute of Technology - School of Business

Date Written: October 4, 2022

Abstract

Off-balance intangible assets, including knowledge capital and organizational capital, are becoming an increasingly important part of the US and global capital stock. In this study, we find that firms with high off-balance intangible assets exhibit a lower extent of corporate tax avoidance. The negative association is mainly manifested in firms with less incentivized managers, a lack of foreign revenue, and lower diversification. We further demonstrate that the negative relation is driven by knowledge capital rather than organizational capital. In addition, firms with high knowledge capital are more productive and are less likely to invest in tax-haven subsidiaries. The primary results are corroborated by an earnings-based measure of intangible intensity. Overall, our study resurrects the investigation on the role of intangible assets in corporate tax policies.

Keywords: intangible assets; tax avoidance; off-balance

JEL Classification: G34, E22, H26

Suggested Citation

Wu, Kai and Ai, Weimian and Liu, Yi, Do Intangible Assets Really Foster Corporate Tax Avoidance? (October 4, 2022). 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

Einaudi Institute for Economics and Finance (EIEF) ( email )

Via Due Macelli, 73
Rome, 00187
Italy

Luiss Guido Carli University ( email )

Via O. Tommasini 1
Rome, Roma 00100
Italy

Yi Liu

Stevens Institute of Technology - School of Business ( email )

Hoboken, NJ 07030
United States

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