Determinants of tax avoidance and the real effects of tax risk disclosures
- Charles Gavan McClure.
- [Stanford, California] : [Stanford University], 2018.
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- 1 online resource.
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|3781 2018 M||In-library use|
- McClure, Charles Gavan, author.
- Larcker, David F., degree supervisor.
- De Simone, Lisa, degree committee member.
- Hartmann, Wesley R. (Wesley Robert), 1973- degree committee member.
- Reiss, Peter C. (Peter Clemens), degree committee member.
- Stanford University. Graduate School of Business.
- I model the determinants of corporate tax avoidance to estimate the real effect of tax risk disclosures. Prior research hypothesizes that firms forgo profitable tax-saving strategies due to non-tax costs, financial reporting incentives, and tax authority scrutiny. Because many of these frictions are not directly observable, I quantify their effects using a dynamic structural model in which the firm chooses a set of tax-saving projects in each period to maximize the discounted stream of future net income. Structural modeling also permits me to quantify the real effect of tax risk disclosures. I estimate the disclosure decreases tax avoidance by 7.6\% but overstates the expected repayment after including audit and inspections by 6.0 times. When I adjust the disclosure to reflect the expected repayment, I find tax avoidance increases by 5.7\%. Finally, I find that average non-tax costs decrease pre-tax earnings by 14.6\% but that the cross-sectional dispersion in effective tax rates primarily arises from differences in the ability to avoid taxes rather than differences in non-tax costs.
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- Submitted to the Graduate School of Business.
- Thesis Ph.D. Stanford University 2018.
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