Information processing costs and corporate tax avoidance: Evidence from the SEC’s XBRL mandate

Chen, Jeff Zeyun; Hong, Hyun A.; Kim, Jeong‐Bon; Ryou, Ji Woo

doi:10.1016/j.jaccpubpol.2021.106822

Cited by 15 publications

(62 citation statements)

References 43 publications

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“…Does CbCR's implementation have the potential to reduce corporate tax avoidance and the tax risk simultaneously? Additionally, Chen et al (2021a) also document that the mandatory use of eXtensible Business Reporting Language (XBRL) can reduce corporate tax avoidance significantly. It is interesting to investigate further (in non-US countries and/or international settings), can XBRL's adoption also be used to better detect and deter corporate tax risks?…”

Section: Regulators and Regulationmentioning

confidence: 99%

Corporate tax risk: a literature review and future research directions

Saragih

Ali

2021

Manag Rev Q

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Our study aims to analyze the current state of, and avenues for, future studies into the tax risk literature. The construct of the corporate tax risk (tax uncertainty) has increasingly begun to attract significant interest from both academics and practitioners. Most previous studies discussing corporate tax behavior have also focused on tax planning, tax avoidance, and tax evasion. Studies investigating the tax risk are still very limited and it is an underexplored subject. Examining the tax risk is crucial because it relates to the tax outcomes arising from a firm's taxation activities. Furthermore, analyzing the tax risk simultaneously with other tax behavior constructs may provide a deeper understanding. Despite the importance of the tax risk construct, there is no published literature review regarding the tax risk. Using a systematic review process, this study selected 37 articles published in 21 highly reputable journals listed in the Scopus database. The findings of this study are provided in two sections: (1) A discussion of the current studies of tax risk, including the theories, methods, and measurements of tax risk, its determinants and consequences; and (2) Recommendations for future research agendas. From the review, we find that tax risk research still tends to be limited and understudied; many relevant research gaps can be identified. Finally, we suggest several research directions into 12 themes: corporate governance, executive personal characteristics, executive compensation plans, ownership structure, firm-level characteristics, the external market, institutional factor, accounting and auditing, operating environment, regulators and regulation, reputational costs, and others.

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Section: Regulators and Regulationmentioning

confidence: 99%

Corporate tax risk: a literature review and future research directions

Saragih

Ali

2021

Manag Rev Q

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“…XBRL enhances the transparency and accessibility of business information by using a uniform format (Cauwenberge and Bosman, 2018). In this case, there are also other potential benefits and consequences of XBRL financial reporting in tax aspects, as reported by the research by Chen et al. (2021), which has successfully proven empirically that firm tax avoidance declined significantly after XBRL adoption for financial reporting.…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 82%

“…To the best of our knowledge, there are only three empirical studies contribute initial evidence on the association between the tax area and XBRL implementation. Chen et al. (2021) discovered that corporate tax avoidance decreased significantly after the implementation of XBRL for financial reporting.…”

Section: Introductionmentioning

confidence: 99%

The role of XBRL adoption on the association between managerial ability and corporate tax outcomes: empirical evidence from Indonesia

Saragih

Ali²

2022

JAAR

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Purpose This study examines the moderating effect of XBRL mandatory adoption on the association between managerial ability and corporate tax outcomes.Design/methodology/approach This study used a quantitative method with panel data regression models using a sample of listed firms on the Indonesia Stock Exchange from 2010 to 2019.Findings The regression results indicate that XBRL adoption moderates the relationship between managerial ability on tax avoidance and tax risk. Firms with higher managerial ability have relatively greater tax avoidance practices and lower tax risk following XBRL adoption. In this study, the authors document unfavorable and unexpected consequences of XBRL in an emerging country.Research limitations/implications Results are from a sample of firms from one emerging country.Practical implications It becomes important and necessary to develop more and better taxonomies with standardized extensions related to taxes information in the XBRL financial reporting to support the tax administrator’s performance in assessing firms’ tax avoidance and tax risk. The authors underscore the importance of improving taxes tags, including tags from financial statements and the disclosure section. This study may also inform policymakers in other countries that more adequate tax tags are needed to leverage benefit from XBRL adoption in monitoring and assessing corporate tax avoidance and tax risk.Originality/value This study is among the first to test an explanation for the moderating role of XBRL adoption on the association between managerial ability and corporate tax avoidance and tax risk.

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“…Paterson and Meegan (2019) also found that when supervisors (e.g., analysts, investors, auditors, and regulators) were close to the firms they inspected, their audit results were better [ 63 ]. Chen et al (2021) studied the impact of the mandatory use of extensible Business Reporting Language (XBRL) for financial reporting to reduce the information processing cost of the IRS on corporate tax evasion, finding that the adoption of XBRL in financial reporting can significantly reduce tax evasion [ 64 ]. The aforementioned research shows that information plays an important role in corporate tax evasion.…”

Section: Literature Review and Research Hypothesismentioning

confidence: 99%

Does government institutional reform deter corporate tax evasion? Evidence from China

Zhu

Sheng-ying

et al. 2022

PLoS ONE

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Exploiting the quasi-natural experiment of the social insurance collection system reform implemented in China in 2000, based on data from China’s industrial enterprise database from 1998 to 2006, we use the difference-in-differences method to test the impact of changing the social insurance collection institution on corporate tax evasion. We find that changing the social insurance collection institution from the social security department to the local tax department significantly deters corporate tax evasion. A series of robustness tests also support this conclusion. The reason is changing the social insurance collection institution to the local tax department increases its’ social insurance information of the enterprise, and reduces the information asymmetry between the enterprise and the collection institution. Furthermore, we find that the impact of changing the social insurance collection institution on corporate tax evasion is more evident in the samples of labor-intensive enterprises, low labor cost enterprises, and enterprises under the jurisdiction of the local tax department. These results indicate that government institutional reform is a valid way to reduce the information asymmetry between the government and enterprises, which will finally deter corporate tax evasion.

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Information processing costs and corporate tax avoidance: Evidence from the SEC’s XBRL mandate

Cited by 15 publications

References 43 publications

Corporate tax risk: a literature review and future research directions

Corporate tax risk: a literature review and future research directions

The role of XBRL adoption on the association between managerial ability and corporate tax outcomes: empirical evidence from Indonesia

Does government institutional reform deter corporate tax evasion? Evidence from China

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