Does Mandatory Disclosure Affect Recognition of Contingent Liabilities? Evidence from FIN 48

Gross, Andrew D.

doi:10.2139/ssrn.1905207

Cited by 5 publications

(8 citation statements)

References 34 publications

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“…On another hand, and in contrast with Gross (2011), who found that companies involved in further TP are related to lower-quality disclosures and are less expected to foster tax reserves when they use FIN 48. However, Inger et al (2018) study suggests the tax authority acquires information in TD, making a trade-off for managers on whether to hide information from the tax authority or provide constructive information for stakeholders.…”

Section: 1mentioning

confidence: 89%

Corporate tax planning and corporate tax disclosure

Mgammal

2019

MEDAR

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Purpose This paper aims to examine the impact of corporate tax planning (TP) on tax disclosure (TD). Using tax expenses data set, with the detailed effective tax rate (ETR) by reconciling individual items of income and expenses. Design/methodology/approach A firm-level panel data set is used to analyse 286 non-financial listed companies on Bursa Malaysia that spans the period 2010-2012. Multivariate statistical analyses were run on the sample data. The empirical understanding of TD depends on public sources of data in the financial statement, characterized in the aggregated note of tax expenses. Fitting with Malaysian environment, the authors measured TD using modified ETR reconciling items. Findings Results show that TP, exhibit a robust positive influence on TD. This suggests that TP is related to lower corporate TD. In addition, companies with high TP attempt to mitigate the disclosure problem by increasing various TD. The authors further find significant positive impact between each of firm size and industry dummy, on TD. This means that company-specific characteristics are significant factors affecting corporate TD. Research limitations/implications This study contributes to the literature on the effect of TP on TD. It depends on both the signalling theory and the Scholes–Wolfson framework, which are the main theories concerned with TP and TD. Therefore, from a theoretical side, the authors add to the current theories by verifying that users are the party influenced whether positively or negatively, by the extent of TD or the extent of TP activities through Malaysian organizations. Practical implications The evidence found in this paper has important policy and practical implications for the authorities, researchers, decision makers and company managers. The findings can provide them some relevant insights on the importance of TP actions from companies’ perspective and contribute to the discussion of who verifies and deduces from TD directed by companies. Originality/value This paper originality is regarded as the first attempt to examine the impact of TP on TD in a developing country such as Malaysia. Malaysian setting is an interesting one to examine because Malaysia could be similar to other countries in Southeast Asia. Results contribute significant insights to the discussion about TD regarding, which parties are responsible for the verification of TD by firms, and which parties benefit from this disclosure. Findings suggest that companies face a trade-off between tax benefits and TD when selecting the type of their TP.

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Section: 1mentioning

confidence: 89%

Corporate tax planning and corporate tax disclosure

Mgammal

2019

MEDAR

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“…Mills, Erickson, and Maydew (1998) postulated as an example that the expenditure of disclosure by companies with the largest tax planning ought to be higher. This is because companies that disclose tax information to the public undertake higher levels of tax planning and, as a consequence, owe increased amounts to the IRS, thus increasing the cost of disclosure (Gross, 2011). In order to avoid being liable for large IRS fees, some investors avoid investing in companies with high levels of tax planning.…”

Section: Definitions Of Tax Disclosurementioning

confidence: 99%

“…Therefore, it could be costly for companies with higher levels of tax planning that have too much to hide and could get more control over their tax reserves (Sidhu & Whittred, 2003). Hence, Gross (2011) expected that higher corporate tax planning offers decreased disclosure quality and lower tax reserves.…”

Section: Definitions Of Tax Disclosurementioning

confidence: 99%

“…Robinson and Schmidt (2013) found that the market sets the value as less than the tax reserves of the companies with a high-goodness disclosure, which indicates that investors believe that poor disclosure assists managers to safeguard the tax centres. Hence, Gross (2011) expected that companies with poor disclosure of the information will pay less tax in their future cash flow.…”

Section: Potential Advantages Of Poor Disclosure Managersmentioning

confidence: 99%

“…Thus, managers must supply further disclosure of information if they believe the costs outweigh the advantages. Moreover, it is expected that managers provide additional disclosure of information to promote attitudes of the tax or limit the scope of tax audits (Gross, 2011).…”

Section: Potential Benefits Of Excess Disclosure Managersmentioning

confidence: 99%

See 2 more Smart Citations

Corporate Tax Disclosure: A Review of Concepts, Theories, Constraints, and Benefits

Mgammal¹,

Ismail²

2015

ASS

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The aim of this paper is to offer an impression of the issues raised by the disclosure of companies' tax information by supplying existing and historical viewpoints from the aspects of concepts, theory, constraints, benefits and measurements. We are concerned that full disclosure of organizations' tax information could result in firms weakening tax information, hampering tax enforcement, and maybe, in a weakened structure, disclosing private data that could give a competitive benefit to those organizations that are not requested to do such a disclosure. Hence, some studies do not underpin full disclosure. On the other hand, full tax disclosure could have numerous beneficial impacts. It might put pressure on regulators to develop the tax system and it might incite companies to oppose aggressive tax decrease strategies. We anticipate and expect interested parties to take into consideration the best practices of tax disclosure in implementing their future plans.

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Corporate governance and tax disclosure phenomenon in the Malaysian listed companies

Mgammal

Bardai

Ismail

2018

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Purpose This paper aims to examine the impact of corporate governance internal mechanisms on tax disclosure in non-financial firms in Malaysia. Managerial ownership and incentive compensation are used as proxies to reflect corporate governance conduct. Design/methodology/approach This study uses panel data set to analyse 286 non-financial listed companies on Bursa Malaysia for the years 2010-2012. Tax disclosure was gathered from the financial statements, particularly in the consolidated of tax expenses. Tax disclosure was measured using modified effective tax rate reconciling items. Multivariate statistical analyses were run on the sample data. Findings This study finds that managerial ownership and incentive compensation do not significantly influence tax disclosure. On the other hand, it is found that there are significant positive associations between each of firm size and industry dummy, and tax disclosure. This means that company-specific characteristics are important factors affecting corporate tax disclosure. Research limitations/implications This study extends the work of previous studies by suggesting that the signalling theory and the agency theory are the main theories concerned with tax disclosure and corporate governance. The authors add an additional appreciation of the contribution of corporate governance from the interested parties’ tax disclosure evaluation in the Malaysian environment. Practical implications The evidence found by this study has important policy and practical knowledge implications for the authorities, researchers, decisionmakers and firm managers. The findings provide them with some relevant insights on the importance of corporate governance practices from the companies’ perspectives and contribute to the discussion of who verifies and deduces from tax disclosure directed by companies. Originality/value To the best of the authors’ knowledge, this study is the first attempt to examine the influence of the corporate governance internal mechanisms on tax disclosure in a developing nation like Malaysia. Although this paper focuses on a single country, it contributes significantly to the debate about tax disclosure in relation to “comply or explain”, as suggested in the Code of Corporate Governance. This study shows that companies are trying to avoid as far as possible disclosing tax-related information.

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Does Mandatory Disclosure Affect Recognition of Contingent Liabilities? Evidence from FIN 48

Cited by 5 publications

References 34 publications

Corporate tax planning and corporate tax disclosure

Corporate tax planning and corporate tax disclosure

Corporate Tax Disclosure: A Review of Concepts, Theories, Constraints, and Benefits

Corporate governance and tax disclosure phenomenon in the Malaysian listed companies

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