What does tax aggressiveness signal? Evidence from stock price reactions to news about tax shelter involvement

Hanlon, Michelle; Slemrod, Joel

doi:10.1016/j.jpubeco.2008.09.004

Cited by 872 publications

(652 citation statements)

References 23 publications

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“…57 We thank Pete Lisowsky and Ryan Wilson for comments and consultation on this section. See Graham and Tucker (2006), Hanlon and Slemrod (2009), and the U.S. Treasury (1999) The authors report that out of the 101 disclosed Reportable Transactions only 48 report any booktax difference at all on the tax return. Of those that did, 12 report a related permanent book-tax difference ($1.4 billion total) and 38 report a related temporary difference ($2.5 billion total; note the same transaction can have part of the effect as a temporary difference and part as a permanent difference).…”

Section: Unrecognized Tax Benefits (Utb)mentioning

confidence: 99%

“…57 We thank Pete Lisowsky and Ryan Wilson for comments and consultation on this section. See Graham and Tucker (2006), Hanlon and Slemrod (2009), and the U.S. Treasury (1999) for descriptions of the shelters. …”

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confidence: 99%

“…52 We recognize that there is not an accepted definition of tax shelter either. We do not have the space to go into this issue but refer readers to the papers on tax shelters such as Bankman (1999Bankman ( , 2004, Graham and Tucker (2006), Wilson (2009), and Hanlon and Slemrod (2009).…”

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confidence: 99%

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A review of tax research

Hanlon¹,

Heitzman²

2010

Journal of Accounting and Economics

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2,073

646

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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...

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Section: Unrecognized Tax Benefits (Utb)mentioning

confidence: 99%

mentioning

confidence: 99%

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A review of tax research

Hanlon¹,

Heitzman²

2010

Journal of Accounting and Economics

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2,073

646

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“…This author found that the majority of cases of tax evasion significantly increase permanent BTDs for companies; that is, investors have created the belief that, if managers are willing to deceive tax authorities, they may also be willing to deceive investors (Hanlon & Slemrod, 2009). …”

Section: Types Of Book-tax Differencesmentioning

confidence: 99%

The Relevance of the Informational Content of Book-Tax Differences for Predicting Future Income: Evidence from Latin American Countries

Marques

Costa

Rogers

2016

Rev. contab. finanç.

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This study aims to investigate whether the different types of book-tax differences are useful for predicting the future income of publicly traded companies in five Latin American countries. This is possible since these differences convey information about transitory components of income, which can be used by investors for predicting future income. However, little is known about the relationship between tax variables and companies' future results. The sample analyzed here is composed of 580 publicly traded companies from five Latin American countries (Argentina, Brazil, Chile, Mexico, and Peru) with information available in the Economatica® database covering 2002 to 2013. In terms of methodology, regressions are employed in order to find a connection between the different types (total, permanent, temporary, and the negative and positive variations) of book-tax differences and companies' current and future earnings per share, as well as some control variables suggested by previous literature. The model's coefficients were estimated through panel data techniques: fixed effects. The results obtained suggest that the information gathered in the different types of book-tax differences (total, permanent, temporary, positive and negative variations) is relevant in predicting future income. Total, permanent and temporary differences contribute to the uncertainty in future income prediction, given that results are more transitory and less persistent in years with higher book-tax differences. Positive and negative variations, on the other hand, attribute higher income in coming years to greater variations in book-tax differences, representing increased timeliness of results and a reduction in off balance sheet funding for the publicly traded companies from these countries.

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“…Furthermore, as suggested in Hanlon and Slemrod (2009) in applying the Desai and Dharmapla (2005) theory, sophisticated tax avoidance may make market participants wary that the firm is not only cheating the IRS but cheating in other facets as well, such as financial reporting.…”

Section: Introductionmentioning

confidence: 99%