Tax risk and stock return volatility: case study for French firms

Assidi, Soufiene

doi:10.1504/ijbcrm.2015.075778

Cited by 5 publications

(8 citation statements)

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“…This study suggests that tax risk is not associated with corporate risk. The result of this study is different from research conducted by Guenther, Matsunaga, & Williams (2013), Hutchens & Rego (2015), and Assidi (2015). This difference in results may cause the data used in the study uses developed country data and more extended periods, so that differences in country conditions may lead to different results.…”

Section: The Effect Of Tax Risk On Corporate Riskcontrasting

confidence: 76%

“…Dyreng, Hanlon, & Maydew (2014) concluded that if tax avoidance is conducted only to take advantage of investments that have no potential legal problems with tax authorities or courts, such as local bond investments, tax avoidance is generally not accompanied by high tax payments in the future. Meanwhile, Guenter et al, (2013, Assidi (2015), Hutchens & Rego (2015), Drake, Lusch, & Stekelberg (2017) stated that company's tax risk might also affect corporate risk. The company has tax risk because it develops policies in responding to tax regulations.…”

Section: The Effect Of Tax Avoidance and Tax Risk On Corporate Riskmentioning

confidence: 99%

“…Meanwhile, Hutchens & Rego (2015) examined tax risks as measured by discretionary book-tax differences and cash ETR volatility produced a consistently positive impact on corporate risk. Research on tax risk on corporate risk is also conducted by Assidi (2015) which used registered companies in France using the size of cash ETR volatility. The research suggests similar to the study undertaken by Hutchens & Rego (2015) that the tax risk has a significant positive effect on the company's risk.…”

Section: Hypotheses Developmentmentioning

confidence: 99%

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The Effect of Tax Avoidance and Tax Risk on Corporate Risk

Firmansyah

Muliana

2018

Jurnal Keuangan Dan Perbankan

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Tax avoidance could increase the corporate risk for several reasons. First, tax avoidance increases the uncertainty of future corporate tax payments, second, the tax avoidance rate could serve as a leading indicator of the company's investment risk. We examined tax avoidance and tax risk on corporate risk. Corporate risk is uncertainty about the future net cash flows of the company as well as a type of risk inherent in management's decision-making arrangements. The sample used in this study were non-financial companies listed on the Indonesia Stock Exchange (IDX). The study used the method of purposive sampling; selected corporate data amounted to 80 so that the sample in this study amounted to 240 firm-years. The method examination in this research used multiple regression analysis with panel data. We found that tax avoidance is not associated with corporate risk. This result indicated that the company that conducts tax avoidance is not related to corporate risk. Furthermore, tax risk is not associated with corporate risk. Thus, tax risk could not capture corporate risk because corporate external factors may cause it.

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Section: The Effect Of Tax Risk On Corporate Riskcontrasting

confidence: 76%

Section: The Effect Of Tax Avoidance and Tax Risk On Corporate Riskmentioning

confidence: 99%

Section: Hypotheses Developmentmentioning

confidence: 99%

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The Effect of Tax Avoidance and Tax Risk on Corporate Risk

Firmansyah

Muliana

2018

Jurnal Keuangan Dan Perbankan

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“…In an earlier study conducted by Assidi (2015) in the French context, the results show that the standard deviation of annual cash ETRs had a significant and positive impact on future stock return volatility. Her study was conducted on a sample of French firms listed on the CAC 40 during the period from 2009 to 2013.…”

Section: Ijlma 664mentioning

confidence: 78%

The moderating effect of tax risk on the relationship between tax avoidance and firm risk: empirical evidence in the French context

Guedrib,

Bougacha

2024

IJLMA

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Purpose This paper aims to study the impact of tax avoidance on corporate risk. It also examines the moderating impact of tax risk on the relationship between tax avoidance and firm risk. Design/methodology/approach Based on available information in the DATASTREAM database about a sample of French firms listed in the CAC 40 from 2010 to 2022, the study uses the feasible generalized least squares method to investigate the impact of tax avoidance on firm risk and the moderating impact of tax risk. To check the robustness of our results, the authors changed the measurement of variables to identify potential biases and they significantly mitigated the endogeneity concerns using instrumental variable regression. Additional estimations were performed, first by using book-tax differences (BTD) and its components, i.e. temporary and permanent, and second by retesting hypotheses of years before the outbreak of the corona virus disease 2019 (COVID-19) pandemic. Findings The results show that tax avoidance negatively affects the firm risk while tax risk has a positive effect on firm risk. More importantly, tax risk moderates the negative impact of tax avoidance on the firm risk. When tax avoidance is associated with a high level of tax risk, it leads to a high firm risk. Accordingly, tax avoidance should be considered in conjunction with tax risk when studying the effect put on the firm risk. Further analyses indicate that tax risk moderates the negative relationship between permanent BTD and firm risk. Research limitations/implications The major limitation of this study is that it focuses only on French-listed firms, which make it difficult to generalize the results. Furthermore, the authors did not introduce governance variables into our models. An effective governance system and transparent information can reduce some of the perverse effects of risky tax avoidance by reducing the tax avoidance costs. The obtained results are of great interest to researchers who need to include the tax risk concept in their examination of the tax avoidance impacts. Practical implications The results are useful for investors wishing to make sound decisions regarding risky tax avoidance practices. Furthermore, the results may signal the need for French policymakers to make more efforts to reduce risky tax avoidance activities that are harmful to investors. They must enforce the existence and the reporting of a tax risk management strategy by firms. Originality/value This study contributes to the growing body of literature on the tax avoidance effects with a special focus on firm risk. This study provides the first French evidence of the role of tax risk in the relationship between tax avoidance and firm risk.

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“…They require advice from tax preparers to minimize tax burden. The tax risk will be borne by the taxpayer if the tax preparers do not exploit tax advantages or misinterpret tax law (Assidi, 2015).…”

Section: Literature Reviewmentioning

confidence: 99%

The effect of tax preparers on corporate tax aggressiveness: Evidence form the UK context

Assidi

Hussainey²

2020

Int. J Fin Econ

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This paper studies the role of tax preparers in tax aggressiveness. Based on a sample of 342 UK companies indexed on the Financial Times Stock Exchange (FTSE) 350 from 2006 to 2016, it finds that external tax preparers are more tax aggressive than internal ones. The result is explained by the capability of external preparers to take more aggressive tax positions than internal preparers because of their knowledge in different changes to tax law, and their higher expertise in this field. The findings has implications for managers, policymakers and researchers.

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Tax risk and stock return volatility: case study for French firms

Cited by 5 publications

References 0 publications

The Effect of Tax Avoidance and Tax Risk on Corporate Risk

The Effect of Tax Avoidance and Tax Risk on Corporate Risk

The moderating effect of tax risk on the relationship between tax avoidance and firm risk: empirical evidence in the French context

The effect of tax preparers on corporate tax aggressiveness: Evidence form the UK context

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