The Relevance of Non-Income Tax Relief

Posted: 3 May 2022

See all articles by Michael S. Drake

Michael S. Drake

Brigham Young University - Marriott School

Ryan Hess

University of Texas at Austin, Red McCombs School of Business, Department of Accounting, Students; Oklahoma State University - Stillwater - Oklahoma State University - Stillwater, Spears School of Business, School of Accounting, Students

Jaron H. Wilde

University of Iowa - Henry B. Tippie College of Business

Braden Williams

University of Texas at Austin - Department of Accounting

Date Written: March 31, 2022

Abstract

Governments regularly offer non-income tax relief to attract business investment. However, it is unclear whether or how markets impound information about the relief into security prices. We use novel data from retrospective public records to examine the information content of non-income tax relief. We predict and find that the receipt and magnitude of this relief are both strongly associated with recipients’ future accounting performance and future abnormal returns. We further find that abnormal returns associated with the relief cluster around future earnings information events. In combination, this evidence suggests that non-income tax relief is value-relevant but is incorporated into prices over time.

Keywords: non-income taxes, non-income tax relief, government tax incentives

Suggested Citation

Drake, Michael S. and Hess, Ryan and Hess, Ryan and Wilde, Jaron H. and Williams, Braden, The Relevance of Non-Income Tax Relief (March 31, 2022). Contemporary Accounting Research, Forthcoming, Available at SSRN: https://ssrn.com/abstract=4084109

Michael S. Drake

Brigham Young University - Marriott School ( email )

United States

Ryan Hess

University of Texas at Austin, Red McCombs School of Business, Department of Accounting, Students ( email )

Austin, TX Texas
United States

Oklahoma State University - Stillwater - Oklahoma State University - Stillwater, Spears School of Business, School of Accounting, Students ( email )

College of Business Administration
345 Business Building
Stillwater, OK 74078
United States

Jaron H. Wilde (Contact Author)

University of Iowa - Henry B. Tippie College of Business ( email )

Acquisitions
5020 Main Library
Iowa City, IA 52242-1000
United States

Braden Williams

University of Texas at Austin - Department of Accounting ( email )

Austin, TX 78712
United States

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