The Effect of Corporate Tax Avoidance on the Cost of Equity
Wee Goh, Beng
The Effect of Corporate Tax Avoidance on the Cost of Equity / Beng Wee Goh, Jimmy Lee, Chee Yeow Lim & Terry Shevlin . -- Páginas 1647 a la 1670
Reseña : 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..
Contabilidad--Publicaciones seriadas
Finanzas corporativas--Legislación--Estados Unidos--Publicaciones seriadas
Evasión de impuestos--Publicaciones seriadas
Lee, Jimmy ; Yeow Lim, Chee ; Shevlin, Terry ;
The Effect of Corporate Tax Avoidance on the Cost of Equity / Beng Wee Goh, Jimmy Lee, Chee Yeow Lim & Terry Shevlin . -- Páginas 1647 a la 1670
Reseña : 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..
Contabilidad--Publicaciones seriadas
Finanzas corporativas--Legislación--Estados Unidos--Publicaciones seriadas
Evasión de impuestos--Publicaciones seriadas
Lee, Jimmy ; Yeow Lim, Chee ; Shevlin, Terry ;