 Climate policy uncertainty and corporate tax avoidanceMd Ruhul Amin, Akinloye Akindayomi, Md Showaib Rahman Sarker and Rafiqul Bhuyan Finance Research Letters, 2023, vol. 58, issue PD Abstract: This study examines the relation between climate policy uncertainty and corporate tax avoidance. Using a novel measure of climate policy uncertainty (CPU), we document that CPU is negatively related to effective tax rates for both contemporary and future years. During higher levels of CPU, firms tend to undertake more aggressive forms of tax avoidance, such as long-term tax planning or tax sheltering. Further analysis suggests that the cash savings from lower tax payments are used to pay dividends and not retained for reinvestments. We tackle the endogenous concern with an instrumental variable approach and the firm fixed effect model. Overall, our findings are consistent with the precautionary hypothesis that firms become more conservative in their long-term investment strategies and are risk-averse when there are uncertainties around climate policies. Keywords: Tax avoidance; Effective tax rate; Dividends; Capital expenditure; Book-tax-difference (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:58:y:2023:i:pd:s1544612323009534 DOI: 10.1016/j.frl.2023.104581 Access Statistics for this article Finance Research Letters is currently edited by R. Gençay More articles in Finance Research Letters from Elsevier |
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