What does tax aggressiveness signal? Evidence from stock price reactions to news about tax shelter involvement
Michelle Hanlon and
Joel Slemrod
Journal of Public Economics, 2009, vol. 93, issue 1-2, 126-141
Abstract:
We study the stock price reaction to news about corporate tax aggressiveness. We find that, on average, a company's stock price declines when there is news about its involvement in tax shelters. We find some limited evidence for cross-sectional variation in the reaction. For example, the reaction is more negative for firms in the retail sector, suggesting that part of the reaction may be a consumer/taxpayer backlash. In addition, the reaction is less negative for firms that are viewed to be generally less tax aggressive, as proxied by the firm's cash effective tax rate. We interpret this as being consistent with the market reacting positively to evidence that a firm is trying to reduce taxes when their financial reports would lead one to believe the firm is not tax aggressive.
Keywords: Tax; aggressiveness; Tax; shelter; Market; reaction (search for similar items in EconPapers)
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (263)
Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0047-2727(08)00132-1
Full text for ScienceDirect subscribers only
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:eee:pubeco:v:93:y:2009:i:1-2:p:126-141
Access Statistics for this article
Journal of Public Economics is currently edited by R. Boadway and J. Poterba
More articles in Journal of Public Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().