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Full-Text Articles in Business
Targets Tax Shelter Participation And Takeover Premiums, Travis Chow, Kenneth J. Klassen, Yanju Liu
Targets Tax Shelter Participation And Takeover Premiums, Travis Chow, Kenneth J. Klassen, Yanju Liu
Research Collection School Of Accountancy
This paper examines the effect of targets' participation in tax shelters on takeover premiums in mergers and acquisitions. Using a novel data set in which targets disclose that they have not participated in tax shelters, we find that targets that make this statement in their merger filings are associated with 4.6 percent higher takeover premiums, on average. These findings suggest that acquirers are concerned about the potential future liabilities when targets have engaged in tax sheltering. Consistent with this interpretation, the results also indicate that the positive association between targets' nonsheltering disclosure and acquisition premiums is stronger for less tax-aggressive …
The Effect Of Corporate Tax Avoidance On The Cost Of Equity, Beng Wee Goh, Jimmy Lee, Chee Yeow Lim, Terry J. Shevlin
The Effect Of Corporate Tax Avoidance On The Cost Of Equity, Beng Wee Goh, Jimmy Lee, Chee Yeow Lim, Terry J. Shevlin
Research Collection School Of Accountancy
Based on Lambert, Leuz, and Verrecchia (2007)'s 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 …
Starbucks: Social Responsibility And Tax Avoidance, Katherine Campbell, Duane Helleloid
Starbucks: Social Responsibility And Tax Avoidance, Katherine Campbell, Duane Helleloid
Management Faculty Publications
This instructional case is designed to explore how accounting choices, and specifically tax minimization practices, should consider a company's overall strategy and positioning within multiple stakeholder groups. Starbucks had been successful in growing its stores and presence in the United Kingdom (UK), and described the profitable growth to investors as something it wanted to build on in other international markets. However, in its 15 years of operations in the UK, the company had paid UK corporate income taxes only once. Using a combination of legal tax avoidance practices (e.g., transfer prices, royalty payments, interest expense), Starbucks UK had effectively shifted …
Corporate Inversions: The Migration Of Corporate Tax Revenue, Joel Barker
Corporate Inversions: The Migration Of Corporate Tax Revenue, Joel Barker
Publications and Research
Estimates of over 20 billion of tax revenue are lost to our economy because of corporate inversions. Therefore, lawmakers are actively exploring ways to stop the hemorrhaging of corporate tax-revenues, tighten restrictions on corporate inversions, and to find ways to collect on defer tax revenues. From a business prospective, corporate inversions are nothing less than prudent, innovative, business strategies to enhance corporate profits. However, it’s undoubtedly having a significant impact on U.S. tax revenues and ultimately reducing domestic investments. Ireland is now the most popular new home to many U.S. Corporations, especially within the pharmaceutical industry. The advantageous tax incentives …
Corporate Political Connections And Tax Aggressiveness, Chansog (Francis) Kim, Liandong Zhang
Corporate Political Connections And Tax Aggressiveness, Chansog (Francis) Kim, Liandong Zhang
Research Collection School Of Accountancy
This study investigates the relation between corporate political connections and tax aggressiveness. We study a broad array of corporate political activities, including the employment of connected directors, campaign contributions, and lobbying. Using a large hand-collected data set of U.S. firms' political connections, we find that politically connected firms are more tax aggressive than nonconnected firms, after controlling for other determinants of tax aggressiveness, industry and year fixed effects, and the endogenous choice of being politically connected. Our findings are robust to various measures of political connections and tax aggressiveness. These results are consistent with the conjecture that politically connected firms …