News on Tax-related Litigation and Consumer Purchases

63 Pages Posted: 2 Oct 2023 Last revised: 11 Jan 2024

See all articles by Xixi Zhang

Xixi Zhang

Vienna University of Economics and Business

Date Written: December 1, 2023


Given the conflicting anecdotal and empirical evidence concerning consumer-related reputational costs of tax aggressiveness, I examine the association between negative news on tax-related litigation —potential tax-related corporate misconduct— and consumer purchases. Leveraging quarterly financial data and hand-collected news for consumer-oriented S&P 500 firms, I find that negative news on tax-related litigation is associated with reduced sales and decreased sales growth by the ordinary least squares model with firm and industry-quarter fixed effects. However, I observe no changes in consumer purchases in response to government announcements of corporate misconduct, suggesting the negative association is attributable to media attention and tax-related issues. Further, the negative association is stronger for small firms, previous tax-aggressive firms, firms with homogeneous products, firms with high domestic sales, first-time news, articles featuring tax headlines, and articles covering unfavorable court or government allegations, regardless of the final decision status. Consumers perceive domestic issues negatively but foreign issues positively. They are also sensitive to the negative tone of news articles. Overall, my findings are consistent with media coverage of potential tax-related corporate misconduct deterring consumer purchases. These findings inform policymakers that news media has a more powerful influence on consumers than government announcements of corporate misconduct.

Keywords: news, consumer purchases, tax-related litigation, corporate misconduct

JEL Classification: H20, H26, M41, G39

Suggested Citation

Zhang, Xixi, News on Tax-related Litigation and Consumer Purchases (December 1, 2023). WU International Taxation Research Paper Series No. 2023-05, Available at SSRN: or

Xixi Zhang (Contact Author)

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Wien 1020

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