DO FIRMS ENGAGE IN AGGRESSIVE TAX REPORTING PRIOR TO BANKRUPTCY?

Wendy Heltzer, Mary Mindak and Mingjun Zhou

Accounting & Taxation, 2015, vol. 7, issue 2, 1-15

Abstract: Our study examines the tax reporting behaviors of firms just before they file for bankruptcy (prebankruptcy firms). Specifically, we investigate whether pre-bankruptcy firms engage in more aggressive tax reporting, in comparison to non-bankruptcy firms. We also investigate whether the relationship between aggressive financial reporting and aggressive tax reporting is different across pre-bankruptcy and non-bankruptcy firms. Our findings suggest that pre-bankruptcy firms engage in more aggressive tax reporting, vis-Ã -vis non-bankruptcy firms. Additionally, we find that the positive relation between aggressive book reporting and aggressive tax reporting is stronger among pre-bankruptcy firms, vis-Ã -vis firms that are not approaching bankruptcy. Thus, our findings not only further our understanding of the motivations behind these significant reporting decisions, but also help us understand how a growing proportion of corporate managers respond to increasing pressures to perform in a depressed economy.

Keywords: Tax Reporting; Bankruptcy; Aggressive Reporting (search for similar items in EconPapers)
JEL-codes: M40 M41 M48 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (1)

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