Tax Avoidance and Firm Value
Authors: Kirkpatrick, A. and Radicic, D.
Conference: BAFA (British Accounting and Finance Association)
Dates: 23-25 March 2015Abstract:
Corporate tax avoidance has potentially significant implications for firm value and is an important issue for investors. This study contributes to research literature by examining the effect of tax avoidance on firm value using a sample of 70 companies drawn from the UK FTSE 100 over a five-year period (2006-2010). The study uses different proxies for tax avoidance based on effective tax rates and book-tax differences. Modelling is undertaken using fixed effects (FE) regression and dynamic panel analysis. Some measures of tax avoidance are associated with firm value while others are not – there is a closer association between firm value and a multi-period effective tax rate than there is with either the one period effective tax rate or the measure of book-tax difference. Furthermore, in this study dynamic panel analysis is undertaken and it is found that the coefficients of tax avoidance measures are not statistically significant. Certain questions remain about how investors view tax accounting information and further research is recommended for a deeper exploration of this new evidence and to consider further methods of measurement of corporate tax avoidance. The results have policy implications.
Preferred by: Alan Kirkpatrick