Financial Statement Readability and Tax Aggressiveness

Beuselinck, Christof; Blanco, Belén; Dhole, Sandip; Lobo, Gerald J.

doi:10.2139/ssrn.3261115

Cited by 10 publications

(17 citation statements)

References 38 publications

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“…More recent studies go beyond the examination of the impact of the readability of accounting disclosures on financial users (i.e., investors, financial analysts, bondholders) and explore whether readability affects other stakeholders (government through taxes, economic outcomes, and society in general). As an example, Beuselinck et al (2018) examine the association between financial statement readability and aggressive tax planning. Their results support the conjecture that firms strategically obfuscate qualitative disclosures in an attempt to hide their tax-aggressive reporting.…”

Section: To Whommentioning

confidence: 99%

Readability of Accounting Disclosures: A Comprehensive Review and Research Agenda*

Gosselin¹,

Maux

Smaïli³

2021

Accounting Perspectives

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Understanding corporate disclosures is important for accounting researchers, as information plays a central role on financial markets. A generation of accounting and finance researchers has shown how readability of different financial and nonfinancial disclosures affects our understanding of organizational behaviors. We review 138 papers from 1950 to 2020 using the five Ws analysis method (Who, What, HoW, Why, and to Whom) developed by Culiberg and Mihelic ˇ(2017). We organize the literature into a comprehensive framework, the readability wheel, which provides an overview of existing studies, helps with understanding the complexity and issues of readability, and outlines an agenda for future research. We also use the readability wheel to discuss the evolution of these studies.

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Section: To Whommentioning

confidence: 99%

Readability of Accounting Disclosures: A Comprehensive Review and Research Agenda*

Gosselin¹,

Maux

Smaïli³

2021

Accounting Perspectives

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“…Moreover, recently in 2010 the IRS generated the Schedule uncertain tax position, which requires businesses to disclose on their federal tax returns individual uncertain tax statuses underlying the US part of their financial statement reserves (IRS, 2010;Mgammal and Ku Ismail, 2015a;Henry et al, 2016;Mgammal, 2017). Beuselinck et al (2018) experimental that the negative association between tax aggressiveness and readability of financial statements is declining once the use of Schedule M-3. Likewise, they found a robust negative association between readability of financial statements and various proxies for tax aggressiveness.…”

Section: Tax Disclosurementioning

confidence: 99%

“…From different hand, organizations significantly increased the quality of TDs in their SEC filings overdue the execution of M-3, suggests that these changes in IRS non-public disclosure requirements affect firms' public disclosures too. Based on the discussion in Bozanic et al (2017), study by Beuselinck et al (2018) found it a reason that firms can have least physical property to hide their activities of tax management subsequent M-3. Consequently, they assume the adverse relationship between financial statement readability and tax aggressiveness to weaken once the obligation to file Schedule M-3.…”

Section: Tax Disclosurementioning

confidence: 99%

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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“…DEF_REV is an indicator variable equal to 1 if the deferred revenue is nonzero, and 0 otherwise. Moreover, tax aggressive firms provide less readable annual reports (Beuselinck et al, 2018). GAAPETR is the total tax expenses divided by pretax income.…”

Section: Methodsmentioning

confidence: 99%

Trouble in Paradise? Disclosure After Tax Haven Leaks

Schmal

Sasse

Watrin

2021

Journal of Accounting, Auditing & Finance

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Tax haven leaks have attracted negative public attention in recent years, prompting scrutiny of corporate behavior in leaked jurisdictions. We investigate whether U.S. companies with subsidiaries in implicated tax havens change their disclosure behavior after a leak. The Offshore Leaks, Panama Papers, Bahamas Leaks, and Paradise Papers are included in this study. We analyze the leaks as separate exogenous shocks to the affected firms’ behavior using a difference-in-differences approach. First, we focus on the readability of tax footnotes in annual reports. Our results suggest that tax footnotes are less readable after a firm’s tax haven is implicated in a leak. This finding suggests that implicated firms try to obfuscate information and hide unethical conduct. Second, we investigate firms’ disclosures of tax expenses using GAAP effective tax rates and find that companies report higher tax expenses after a leak. These changes in behavior could indicate that firms are concerned about the increasingly critical public attitude toward doing business in leaked low-tax jurisdictions and that they are taking measures to counteract possible negative reputational consequences. JEL Classification: F23, G14, H26, M41

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Financial Statement Readability and Tax Aggressiveness

Cited by 10 publications

References 38 publications

Readability of Accounting Disclosures: A Comprehensive Review and Research Agenda*

Readability of Accounting Disclosures: A Comprehensive Review and Research Agenda*

Corporate tax planning and corporate tax disclosure

Trouble in Paradise? Disclosure After Tax Haven Leaks

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