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Tax Reporting Aggressiveness and Its Relation to Aggressive Financial Reporting
Open accessAbstract
ABSTRACT: We investigate the association between aggressive tax and financial reporting and find a strong, positive relation. Our results suggest that insufficient costs exist to offset financial and tax reporting incentives, such that nonconformity between financial accounting standards and tax law allows firms to manage book income upward and taxable income downward in the same reporting period. To examine the relation between these aggressive reporting behaviors, we develop a measure of tax reporting aggressiveness that statistically detects tax shelter activity at least as well as, and often better than, other measures. In supplemental stock returns analyses, we confirm that the market overprices financial reporting aggressiveness. We also find that the market overprices tax reporting aggressiveness, but only for firms with the most aggressive financial reporting.
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Citations
Cited by
Long-Run Corporate Tax Avoidance
Dyreng, S. D., Hanlon, M., & Maydew, E. L. (2008) · The Accounting Review · doi:10.2308/accr.2008.83.1.61 · Cited by 2,107
The importance of the internal information environment for tax avoidance
Gallemore, J., & Labro, E. (2015) · Journal of Accounting and Economics · doi:10.1016/j.jacceco.2014.09.005 · Cited by 575
HASAN, I., HOI, C.-K. S., WU, Q., & ZHANG, H. (2017) · Journal of Accounting Research · doi:10.1111/1475-679x.12159 · Cited by 413
Dual Class Ownership and Tax Avoidance
McGuire, S. T., Wang, D., & Wilson, R. J. (2011) · SSRN Electronic Journal · doi:10.2139/ssrn.1761994 · Cited by 341
Husna, A., & Satria, I. (2019) · International Journal of Economics and Financial Issues · doi:10.32479/ijefi.8595 · Cited by 336
Metadata
- Authors
- Frank, M. M., Lynch, L. J., & Rego, S. O.
- Venue
- The Accounting Review
- Publisher
- American Accounting Association
- Published
- 2009-03-01
- Volume
- 84
- Issue
- 2
- Pages
- 467-496
- ISSN
- 0001-4826 (ISSN-L)
- 1558-7967
- OpenAlex
- W3122071409
- Cited by
- 1,523
- References
- 0
- FWCI
- 149.56
- Type
- journal article
- Language
- en
- Open access
- green
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- Frank, M. M., Lynch, L. J., & Rego, S. O. (2009). Tax Reporting Aggressiveness and Its Relation to Aggressive Financial Reporting. The Accounting Review. https://doi.org/10.2308/accr.2009.84.2.467
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Semantic Scholar’s data is described in: Kinney, R., et al. (2023). The Semantic Scholar Open Data Platform. arXiv:2301.10140.
