Expected economic growth and investment in corporate tax planning

Jaewoo Kim, Sean McGuire, Steven Savoy and Ryan Wilson ()
Additional contact information
Jaewoo Kim: University of Oregon
Sean McGuire: Texas A&M University
Steven Savoy: University of Illinois at Chicago
Ryan Wilson: University of Oregon

Review of Accounting Studies, 2022, vol. 27, issue 2, No 11, 745-778

Abstract: Abstract This study investigates whether expected economic growth is associated with investment in corporate tax planning. We predict that higher expected economic growth increases the net present value of tax planning opportunities and that thus firms’ investment in tax planning will be higher in periods when expectations about economic growth are optimistic. Consistent with expectations, we find that changes in fees for auditor-provided tax services are positively associated with GDP growth forecasts after controlling for known determinants of tax avoidance. Using path analysis, we find that expected macroeconomic growth influences firms’ investment in tax planning directly, rather than indirectly through other investments. Cross-sectional analyses show this association is more pronounced for firms that are financially constrained and those that are more likely to experience a change in tax status. Our study highlights that growth expectations at the macroeconomic level are an important determinant of time-series variation in firm’s investment in corporate tax planning.

Keywords: Macroeconomic growth; Tax planning; GDP Forecast (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://link.springer.com/10.1007/s11142-021-09625-5 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

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:spr:reaccs:v:27:y:2022:i:2:d:10.1007_s11142-021-09625-5

Ordering information: This journal article can be ordered from
http://www.springer.com/accounting/journal/11142

DOI: 10.1007/s11142-021-09625-5

Access Statistics for this article

Review of Accounting Studies is currently edited by Paul Fischer

More articles in Review of Accounting Studies from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().