The Use of Financial Accounting Choice to Support Aggressive Tax Positions: Public and Private Firms

Cloyd, C. Bryan; Pratt, Jamie; Stock, Toby

doi:10.2307/2491330

Cited by 221 publications

(180 citation statements)

References 8 publications

Supporting

Mentioning

121

Contrasting

Unclassified

Order By: Relevance

“…While prior literature found that private firms have higher book-tax differences (e.g. Cloyd et al 1996;Mills and Newberry 2001) and are more likely to shift income across jurisdictions (Beuselinck, Deloof, and Vanstraelen 2015), the findings of this paper show that public firms, not private ones, are more tax aggressive.…”

contrasting

confidence: 79%

“…Ball and Shivakumar 2005;Chen, Chen, Cheng, and Shevlin 2010;Kosi and Valentincic 2012;Lin, Mills, and Zhang 2014). In line with this notion, prior literature shows that public firms have higher financial non-tax reporting costs that result in larger book-tax differences (Cloyd, Pratt, and Stock 1996;Mills and Newberry 2001). However, one cannot infer from these results that private firms are more tax aggressive, as book-tax differences cannot be used to compare firms with varying levels of importance on financial accounting earnings (Hanlon and Heitzman 2010).…”

Section: Introductionmentioning

confidence: 70%

“…Cloyd et al (1996) show that public firms have higher financial non-tax reporting costs that result in larger book-tax differences. Mills and Newberry (2001) confirm the survey results of Cloyd et al (1996) with actual tax return data. Klassen (1997) uses inside ownership concentration as a proxy for reduced capital market pressure.…”

mentioning

confidence: 95%

See 2 more Smart Citations

Are Private Firms Really More Tax Aggressive than Public Firms?

Pierk

2016

SSRN Journal

View full text Add to dashboard Cite

contrasting

confidence: 79%

Section: Introductionmentioning

confidence: 70%

See 1 more Smart Citation

Are Private Firms Really More Tax Aggressive than Public Firms?

Pierk

2016

SSRN Journal

View full text Add to dashboard Cite

“…On the other hand, if the taxing authority uses the book-tax differences as an indicator of some form of tax aggressiveness, this increases the cost of the tax aggressiveness by increasing the likelihood of detection. 9 See Cloyd et al (1996) and Mills (1998) for evidence on the effect of conformity on book and tax reporting decisions.…”

Section: Sources Of Differences Between Book and Taxable Incomementioning

confidence: 99%

A review of tax research

Hanlon¹,

Heitzman²

2010

Journal of Accounting and Economics

2,061

646

View full text Add to dashboard Cite

Abstract:In this paper, we present a review of tax research. We survey four main areas of the literature: 1) the informational role of income tax expense reported for financial accounting, 2) corporate tax avoidance, 3) corporate decision-making including investment, capital structure, and organizational form, and 4) taxes and asset pricing. We summarize the research areas and questions examined to date and what we have learned or not learned from the work completed thus far. In addition, we provide our opinion as to the interesting and important issues for future research. ______________________This paper was prepared for the 2009 Journal of Accounting and Economics Conference. We appreciate comments from Scott Dyreng, Mihir Desai (discussant), S.P. Kothari (editor), John Long, Ed Maydew, Lillian Mills, Tom Omer, Sonja Rego, Doug Shackelford, Terry Shevlin, Joel Slemrod, Cliff Smith, David Weber, Ryan Wilson, Jerry Zimmerman, George Zodrow, and conference participants at the JAE Conference as well as at the 2009 University of North Carolina Tax Symposium and the discussant there, Bill Gentry. All errors and omissions are our own. * Corresponding author: 100 Main Street, Cambridge, MA. email: mhanlon@mit.edu. 1 A Review of Tax Research IntroductionIn this paper, we review tax research in accounting as well as tax research in economics and finance to the extent that it is related to or is affected by research in accounting. Shackelford and Shevlin (2001) provide a careful and thorough review of empirical tax research in accounting in the prior Journal of Accounting and Economics review volume. Shackelford and Shevlin limit their review to research published in accounting outlets and describe the development of the relatively young archival, microeconomic-based income tax literature that arose from the Scholes andWolfson framework. In his discussion of the review, Maydew (2001) emphasizes the need for tax researchers in accounting to think more broadly and to incorporate more theory and evidence from economics and finance. We agree. Tax research has a long history in many disciplines; this fact cannot be ignored. Our goal in this paper is to integrate the theoretical and empirical tax research from accounting, economics, and finance, to summarize what is known and unknown, and to offer suggestions for future research.The multidisciplinary nature of tax research is what makes tax research exciting (yes, exciting), yet difficult. Tax research can be difficult not only because one has to follow tax studies in accounting, finance, economics, and law (through academic institutions, governmental agencies, and policy think tanks), but also because different disciplines often use different languages and have different perspectives. 1 For example, economists generally focus on tax compliance, tax incidence (such as who bears the corporate tax), investment and economic growth effects (such as how taxes 1 Slemrod (1992a) characterizes these differences as economists studying what corporations actually do and accountants stud...

show abstract

“…Subsequent studies (e.g., Newberry, 2001 andCloyd et al, 1996) focus on the book-tax tradeoffs that are associated with various tax avoidance opportunities (i.e., some tax avoidance strategies reduce both taxable and financial statement income, whereas others affect only taxable income). Although this prior research is useful, it provides little insight into why some firms engage in more tax planning than others (Shackelford and Shevlin, 2001).…”

Section: Prior Literaturementioning

confidence: 99%

Corporate governance, incentives, and tax avoidance

Armstrong

Blouin

Jagolinzer³

et al. 2015

Journal of Accounting and Economics

697

242

View full text Add to dashboard Cite

We examine the link between corporate governance, managerial incentives, and corporate tax avoidance. Similar to other investment opportunities that involve risky expected cash flows, unresolved agency problems may lead managers to engage in more or less corporate tax avoidance than shareholders would otherwise prefer. Consistent with the mixed results reported in prior studies, we find no relation between various corporate governance mechanisms and tax avoidance at the conditional mean and median of the tax avoidance distribution. However, using quantile regression, we find a positive relation between board independence and financial sophistication for low levels of tax avoidance, but a negative relation for high levels of tax avoidance. These results indicate that these governance attributes have a stronger relation with more extreme levels of tax avoidance, which are more likely to be symptomatic of over-and under-investment by managers. Abstract: We examine the link between corporate governance, managerial incentives, and corporate tax avoidance. Similar to other investment opportunities that involve risky expected cash flows, unresolved agency problems may lead managers to engage in more or less corporate tax avoidance than shareholders would otherwise prefer. Consistent with the mixed results reported in prior studies, we find no relation between various corporate governance mechanisms and tax avoidance at the conditional mean and median of the tax avoidance distribution. However, using quantile regression, we find a positive relation between board independence and financial sophistication for low levels of tax avoidance, but a negative relation for high levels of tax avoidance. These results indicate that these governance attributes have a stronger relation with more extreme levels of tax avoidance, which are more likely to be symptomatic of over-and under-investment by managers.JEL: G34, H25, H26, K34, M41

show abstract

The Use of Financial Accounting Choice to Support Aggressive Tax Positions: Public and Private Firms

Cited by 221 publications

References 8 publications

Are Private Firms Really More Tax Aggressive than Public Firms?

Are Private Firms Really More Tax Aggressive than Public Firms?

A review of tax research

Corporate governance, incentives, and tax avoidance

Contact Info

Product

Resources

About