Keywords

tax avoidance, reputational costs, executive impact

Abstract

This study investigates whether firms and their top executives bear reputational costs from engaging in aggressive tax avoidance activities. At least two decades of empirical tax research has shown that firms engage in a wide range of strategies for tax avoidance purposes. 1 Recent studies suggest that for many firms, tax avoidance appears to be highly effective at reducing the firms’ tax payments and increasing their after-tax earnings. For example, Dyreng, Hanlon, and Maydew (2008) find that more than a quarter of publicly traded U.S. firms are able to reduce their taxes to less than 20 percent of their pre-tax earnings, and are able to sustain such low rates of taxation over periods as long as ten years. Tax avoidance strategies are abundant and include a wide variety of activities such as shifting income into tax havens (Dyreng and Lindsey 2009), using complex hybrid securities (Engel, Erickson, and Maydew 1999), and engaging in other tax shelters (Wilson 2009).

Original Publication Citation

“The Reputational Costs of Tax Avoidance” (with John Gallemore and Edward Maydew) , Contemporary Accounting Research (2014) 31: 1103-1133

Document Type

Peer-Reviewed Article

Publication Date

2014

Publisher

Contemporary Accounting Research

Language

English

College

Marriott School of Business

Department

Accountancy

University Standing at Time of Publication

Full Professor

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