Corporate tax avoidance, economic policy uncertainty, and the value of excess cash: International evidence

Ramzi Benkraiem, Safa Gaaya and Faten Lakhal

Economic Modelling, 2022, vol. 108, issue C

Abstract: This paper presents new evidence on the links between corporate tax avoidance, economic policy uncertainty, and the value of excess cash. Based on an international sample of 41,535 firm-year observations from 2005 to 2018, the results show that tax avoidance negatively affects the value of excess cash. This negative effect is only prevalent for firms operating in countries with strong investor protection. This study also explores the role of economic policy uncertainty and shows that tax avoidance lowers the discount on the value of excess cash in uncertain times because investors may underestimate any negative reputational and risky practices. These findings have important implications for investors, policymakers and the welfare of the overall economy.

Keywords: Corporate tax avoidance; Value of excess cash; Economic policy uncertainty; Investor protection (search for similar items in EconPapers)
JEL-codes: G32 G34 M41 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:108:y:2022:i:c:s0264999321003278

DOI: 10.1016/j.econmod.2021.105738

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