Spillover Effects of Tax Avoidance on Peers' Firm Value-Reference-Cited by-同舟云学术

Spillover Effects of Tax Avoidance on Peers' Firm Value

Published:2020-12-22 Issue:4 Volume:96 Page:51-79
ISSN:1558-7967
Container-title:The Accounting Review
language:en
Short-container-title:

Author:

Bauckloh Tobias¹,Hardeck Inga²^ORCID,Inger Kerry K.³^ORCID,Wittenstein Patrick⁴,Zwergel Bernhard¹

Affiliation:

1. University of Kassel

2. University of Regensburg

3. Auburn University

4. University of Hamburg

Abstract

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. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: G32; H25; H26.

Publisher

American Accounting Association

Subject

Economics and Econometrics,Finance,Accounting

Link

http://meridian.allenpress.com/accounting-review/article-pdf/96/4/51/2867500/i1558-7967-96-4-51.pdf

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