Spillover Effects of Tax Avoidance on Peers' Firm Value

Bauckloh, Tobias and Hardeck, Inga and Inger, Kerry K. and Wittenstein, Patrick and Zwergel, Bernhard (2021) Spillover Effects of Tax Avoidance on Peers' Firm Value. ACCOUNTING REVIEW, 96 (4). pp. 51-79. ISSN 0001-4826, 1558-7967

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Abstract

This research examines spillover effects of tax avoidance on peers' firm value using the setting of the European Commission's state aid investigations of private letter rulings. We assume that news about a firm's tax avoidance strategies also reveals information about peers' tax avoidance because investors expect similar firms to use similar strategies. Based on an event study design, we show that news about potential costs of tax avoidance of targeted U.S. multinational firms leads to negative stock price reactions among their peers. Moreover, peers' investors adjust their evaluations upward for news in favor of the targeted firms. Consistent with the level of tax avoidance being indicative of having similar strategies, spillover effects are stronger for firms with the highest levels of tax avoidance when examining a broad set of peers. Our findings suggest the need for a more comprehensive understanding of the costs and benefits of tax avoidance.

Item Type:	Article
Uncontrolled Keywords:	INTRAINDUSTRY INFORMATION TRANSFERS; REPUTATIONAL COSTS; CORPORATE; CONTAGION; AGGRESSIVENESS; INCENTIVES; VALUATION; EVASION; RATES; peer effects; spillover effects; EC state aid; tax avoidance
Subjects:	600 Technology > 650 Management & auxiliary services
Divisions:	Business, Economics and Information Systems > Institut für Betriebswirtschaftslehre > Lehrstuhl für Betriebswirtschaftliche Steuerlehre (Prof. Dr. Dirk Meyer-Scharenberg)
Depositing User:	Dr. Gernot Deinzer
Date Deposited:	12 Sep 2022 07:38
Last Modified:	12 Sep 2022 07:38
URI:	https://pred.uni-regensburg.de/id/eprint/47170

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