Network Ties Among Low-Tax Firms

Abstract

This study examines (1) whether network ties help explain variation in tax avoidance, and (2) how the relation between network ties and tax avoidance varies depending on the nature and context of those ties. We posit that information on a range of tax-avoidance strategies is shared among firms through their social network connections. Using board interlocks to proxy for these connections, we find that firms with greater board ties to low-tax firms have lower cash ETRs themselves. Ties to low-tax firms are more influential when the focal firm and its network partner are operationally and strategically similar, as are ties created by executive directors. Board ties to low-tax firms are also more influential when the focal firm and its network partner engage the same local auditor. Overall, our results suggest that the influence of firms' network ties on their tax-avoidance behavior depends on the character of those ties.

Targets' Tax Shelter Participation and Takeover Premiums

“…Cai and Sevilir () find that acquirers pay significantly lower takeover premiums for targets in transactions where the acquirer and target are connected via board ties. Previous studies on tax avoidance also show that the adoption of tax shelters can spread across firms via network ties such as board interlock (Brown ) and that connected firms share similar tax profiles (Brown and Drake ). Our second hypothesis is motivated by less aggressive acquirers paying more for less aggressive targets.…”

Agressividade Tributária: Um Survey da Literatura

“…Estudos documentaram que alguns gatekeepers, tais como redes corporativas (Brown & Drake, 2013), contas de especialistas em indústria (McGuire, Omer & Wang, 2012), fundos de hedge ativistas (Cheng, Huang, Yinghua Li & Stanfield, 2012) e os investidores institucionais (Khan, Srinivasan & Tan, 2017) facilitam ou inibem a agressividade tributária em certas configurações. Além disso, as evidências sugerem que a existência de departamentos fiscais internos e a contratação de assessores tributários especializados estão associados com maior Agressividade Tributária (Klassen et al, 2016).…”

The Role of Additional Non-EPS Forecasts: Evidence Using Pre-Tax Forecasts

“…More specifically, I expect to see long-term changes in tax avoidance rather than temporary changes. This measure of tax avoidance also follows the methodology used in Brown and Drake (2012) to examine changes in tax avoidance. The model used to test how initiations in analysts' pre-tax earnings coverage are associated with changes in tax avoidance is provided below.…”