Tax-strategy-related words, firm’s ability, and tax avoidance

Yicheng Wang () and Brian Wright ()
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Yicheng Wang: Xi’an Jiaotong-Liverpool University
Brian Wright: Xi’an Jiaotong-Liverpool University

International Journal of Disclosure and Governance, 2024, vol. 21, issue 4, No 11, 685-713

Abstract: Abstract This study examines the linguistic cues of tax avoidance in 10-K filings by constructing a tax-strategy-related (TSR) word list. We find a positive relationship between a firm's innate ability to avoid taxes, measured by the occurrence of TSR words, and the level of tax avoidance. Our results are robust across multiple measures and unaffected by firms' disclosure behavior or managerial ability. Additionally, investors negatively value the disclosure of TSR words in well-governed and less tax-avoiding firms.

Keywords: Tax avoidance; Tax strategy; Firm’s ability; Accounting disclosure (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1057/s41310-023-00214-3

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