Firm location and tax avoidance: Urban versus non-urban firms

Erik Devos, Yun Ke, Kenneth Snead and Fuzhao Zhou

Advances in accounting, 2024, vol. 67, issue C

Abstract: We examine the impact of firms' geographic locations on their tax avoidance behavior. We consider urban firms as those headquartered in the top ten metropolitan statistical areas (MSAs) based on the 2000 census; all others are labeled non-urban firms. Using GAAP and cash-effective tax rates to proxy for tax avoidance, we report that non-urban firms have relatively higher tax avoidance levels. Our results are robust to propensity score matching, using alternative measures of geographic location, including additional control variables, and employing different regression specifications. Further analyses suggest that non-urban firms' tax avoidance appears to be value-increasing to shareholders. Overall, our study provides potential policy implications for the IRS.

Keywords: Geographic location; Urban; Tax avoidance; Financial constrain; IRS attention (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:advacc:v:67:y:2024:i:c:s0882611024000361

DOI: 10.1016/j.adiac.2024.100765

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