The DOI matches its Crossref record; 3 of the 3 references it cites were found in a registry or an index.
The Effect of Corporate Tax Avoidance on the Cost of Equity
Open accessAbstract
ABSTRACT Based on Lambert, Leuz, and Verrecchia's (2007) derivation of the cost of equity capital in terms of expected cash flows, we generate a testable hypothesis that relates tax avoidance to a firm's cost of equity capital. Using three broad measures of tax avoidance—book-tax differences, permanent book-tax differences, and long-run cash effective tax rates—to test our hypothesis, we find that the cost of equity is lower for tax-avoiding firms. This effect is stronger for firms with better outside monitoring, firms that likely realize higher marginal benefits from tax savings, and firms with higher information quality. Overall, our results suggest that equity investors generally require a lower expected rate of return due to the positive cash flow effects of corporate tax avoidance. JEL Classifications: G32; H26; M41.
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Cites
Common risk factors in the returns on stocks and bonds
Fama, E. F., & French, K. R. (1993) · Journal of Financial Economics · doi:10.1016/0304-405x(93)90023-5 · Cited by 25,754
Accounting Information, Disclosure, and the Cost of Capital
LAMBERT, R., LEUZ, C., & VERRECCHIA, R. E. (2007) · Journal of Accounting Research · doi:10.1111/j.1475-679x.2007.00238.x · Cited by 2,586
Earnings quality: Evidence from the field
Dichev, I. D., Graham, J. R., Harvey, C. R., & Rajgopal, S. (2013) · Journal of Accounting and Economics · doi:10.1016/j.jacceco.2013.05.004 · Cited by 1,103
Cited by
ESG practices and the cost of debt: Evidence from EU countries
Eliwa, Y., Aboud, A., & Saleh, A. (2021) · Critical Perspectives on Accounting · doi:10.1016/j.cpa.2019.102097 · Cited by 907
Product Market Power and Tax Avoidance: Market Leaders, Mimicking Strategies, and Stock Returns
Kubick, T. R., Lynch, D., Mayberry, M. A., & Omer, T. C. (2013) · SSRN Electronic Journal · doi:10.2139/ssrn.2215924 · Cited by 269
Metadata
- Authors
- Goh, B. W., Lee, J., Lim, C. Y., & Shevlin, T. J.
- Venue
- SSRN Electronic Journal
- Publisher
- Elsevier BV
- Published
- 2013
- Volume
- 91
- Issue
- 6
- Pages
- 1647-1670
- ISSN
- 0001-4826 (ISSN-L)
- 1556-5068
- OpenAlex
- W2140600224
- Cited by
- 422
- References
- 3
- FWCI
- 29.94
- Type
- journal article
- Language
- en
- Open access
- green
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