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Conforming Tax Avoidance and Firm Value

David Tree & Dilin Wang

Advances in Taxation2024https://doi.org/10.1108/s1058-749720240000031003book-chapter
AJG 2ABDC B
Weight
0.30

Abstract

This study explores the relationship between firm value and conforming tax avoidance (tax avoidance that does not create a book-tax difference). Tax avoidance provides firms with more cash and creates value. However, conforming tax avoidance has costs, such as lower book income, and these costs potentially lower firm value. As such, it is unclear whether conforming tax avoidance is positively or negatively correlated with firm value. We use a measure of conforming tax avoidance that was recently introduced in the literature, and bifurcate tax avoidance into conforming and nonconforming portions using a large sample. We present evidence that investors place a negative value on conforming tax avoidance for the average firm. We also examine the top quartile based on the measure of conforming tax avoidance and find a positive correlation between firm value and conforming tax avoidance for this subsample.

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https://doi.org/https://doi.org/10.1108/s1058-749720240000031003

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@article{david2024,
  title        = {{Conforming Tax Avoidance and Firm Value}},
  author       = {David Tree & Dilin Wang},
  journal      = {Advances in Taxation},
  year         = {2024},
  doi          = {https://doi.org/https://doi.org/10.1108/s1058-749720240000031003},
}

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Conforming Tax Avoidance and Firm Value

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Evidence weight

0.30

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.00 × 0.4 = 0.00
M · momentum0.50 × 0.15 = 0.07
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.