Organizational Capital, Corporate Tax Avoidance, and Firm Value
Journal of Corporate Finance, Volume 70, October 2021.
63 Pages Posted: 22 Jul 2021 Last revised: 6 May 2022
Date Written: July 21, 2021
We show that firms with higher levels of organizational capital (OC) exhibit higher levels of tax avoidance and that shareholders view tax avoidance of high OC firms as value-enhancing. We also show that the OC-tax avoidance relation mainly manifests in firms with good internal governance and information environment and in firms that face tight financial constraints. In addition, we document that tax avoidance by high OC firms increases future cash flow and that high OC firms are more likely to invest in tax haven subsidiaries. Overall, our evidence suggests that OC enhances firm’s tax efficiency.
Keywords: Organizational capital, Tax Avoidance, Firm Value
JEL Classification: E22, G32, H25, H26
Suggested Citation: Suggested Citation