Journal article
Spillover Effects of Tax Avoidance on Peers' Firm Value



Publication Details
Authors:
Bauckloh, T.; Zwergel, B.; Hardeck, I.; Inger, K.; Wittenstein, P.
Publishing status:
In press / published online in advance
Journal acronym:
TAR

Abstract

This research examines spillover effects of tax avoidance on peers’ firm value using the setting of the European Commission’s state aid investigations of private letter rulings. We assume that news about a firm’s tax avoidance strategies also reveals information about peers’ tax avoidance because investors expect similar firms to use similar strategies. Based on an event study design, we show that news about potential costs of tax avoidance of targeted U.S. multinational firms leads to negative stock price reactions among their peers. Moreover, peers’ investors adjust their evaluations upwards for news in favor of the targeted firms. Consistent with the level of tax avoidance being indicative of having similar strategies, spillover effects are stronger for firms with the highest levels of tax avoidance when examining a broad set of peers. Our findings suggest the need for a more comprehensive understanding of the costs and benefits of tax avoidance.



Authors/Editors

Last updated on 2021-04-05 at 16:34