Tax and financial reporting aggressiveness: evidence from Europe

Alexandra Fernandes (), António Cerqueira () and Elísio Brandão ()
Additional contact information
Alexandra Fernandes: Alexandra Fernandes
António Cerqueira: António Cerqueira
Elísio Brandão: Elísio Brandão

FEP Working Papers from Universidade do Porto, Faculdade de Economia do Porto

Abstract: This study examines the relation between financial and tax aggressive reports on public companies from Europe-15, over the period of 2001-2015. Also, it pretends to analyse if the link between tax and financial aggressiveness gets weaker after IFRS adoption in Europe. To run empirical work, I use discretionary accruals calculated by modified-Jones model (Dechow, Sloan, and Sweeney 1995) as a proxy of financial aggressiveness (DFIN) and discretionary permanent differences as a measure of tax aggressiveness (DTAX) (used by Mary Frank, Luann Lynch and Sonja Rego, 2009), which I estimate using EGLS cross section weights for year and Fama- French 12 industries. To prove that firms with aggressive tax report tend to be financial aggressive and that the link between tax and financial aggressiveness is more significant before IFRS implementation I analyse Pearson and Spearman correlation. Additionally, I estimate relation between DTAX and DFIN when controlling for firm size, earnings management and tax planning incentives using OLS and apply the same model with period restriction for before and after IFRS adoption. Results suggest that financial aggressive firms tend to also be tax aggressive and the link between these two aggressive reports is weaker after IFRS adoption

Keywords: Tax planning; earnings management; book tax differences; aggressive financial report; aggressive tax report. (search for similar items in EconPapers)
JEL-codes: E62 F62 G32 H26 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2017-11
New Economics Papers: this item is included in nep-acc, nep-cfn and nep-eur
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.fep.up.pt/investigacao/workingpapers/wp597.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.fep.up.pt/investigacao/workingpapers/wp597.pdf [302 Found]--> https://fep.up.pt/investigacao/workingpapers/wp597.pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:por:fepwps:597

Access Statistics for this paper

More papers in FEP Working Papers from Universidade do Porto, Faculdade de Economia do Porto Contact information at EDIRC.
Bibliographic data for series maintained by ().