Details
| Original language | English |
|---|---|
| Pages (from-to) | 278-292 |
| Number of pages | 15 |
| Journal | Journal of economic psychology |
| Volume | 72 |
| Early online date | 24 Apr 2019 |
| Publication status | Published - Jun 2019 |
Abstract
This study examines stock market responses to news on corporate tax strategies. Our dataset includes 176 tax news items regarding listed German firms over the period from 2003 to 2016. In contrast to previous research, we distinguish between news about corporate tax strategies that are legal (tax avoidance) and illegal (tax evasion). We show that stock market responses differ significantly between news items concerning legal and illegal activities. We find negative abnormal returns for tax evasion news, while we find no general effect for tax avoidance news. Moreover, we do not observe any evidence of average reputation or agency costs exceeding the positive effect of legal tax planning. However, we find positive stock price reactions to legal tax planning when firms’ tax risk is low. Our findings contribute to the ongoing debate among researchers, politicians, and corporate managers on the benefits and costs of corporate tax strategies and address the issue of morals in markets.
Keywords
- 2960, 4200, Market reaction, Moral of markets, Tax aggressiveness, Tax avoidance, Tax evasion, Tax risk
ASJC Scopus subject areas
- Psychology(all)
- Applied Psychology
- Social Sciences(all)
- Sociology and Political Science
- Economics, Econometrics and Finance(all)
- Economics and Econometrics
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In: Journal of economic psychology, Vol. 72, 06.2019, p. 278-292.
Research output: Contribution to journal › Article › Research › peer review
}
TY - JOUR
T1 - Stock price reactions to news about corporate tax avoidance and evasion
AU - Blaufus, Kay
AU - Möhlmann, Axel
AU - Schwäbe, Alexander Norbert
PY - 2019/6
Y1 - 2019/6
N2 - This study examines stock market responses to news on corporate tax strategies. Our dataset includes 176 tax news items regarding listed German firms over the period from 2003 to 2016. In contrast to previous research, we distinguish between news about corporate tax strategies that are legal (tax avoidance) and illegal (tax evasion). We show that stock market responses differ significantly between news items concerning legal and illegal activities. We find negative abnormal returns for tax evasion news, while we find no general effect for tax avoidance news. Moreover, we do not observe any evidence of average reputation or agency costs exceeding the positive effect of legal tax planning. However, we find positive stock price reactions to legal tax planning when firms’ tax risk is low. Our findings contribute to the ongoing debate among researchers, politicians, and corporate managers on the benefits and costs of corporate tax strategies and address the issue of morals in markets.
AB - This study examines stock market responses to news on corporate tax strategies. Our dataset includes 176 tax news items regarding listed German firms over the period from 2003 to 2016. In contrast to previous research, we distinguish between news about corporate tax strategies that are legal (tax avoidance) and illegal (tax evasion). We show that stock market responses differ significantly between news items concerning legal and illegal activities. We find negative abnormal returns for tax evasion news, while we find no general effect for tax avoidance news. Moreover, we do not observe any evidence of average reputation or agency costs exceeding the positive effect of legal tax planning. However, we find positive stock price reactions to legal tax planning when firms’ tax risk is low. Our findings contribute to the ongoing debate among researchers, politicians, and corporate managers on the benefits and costs of corporate tax strategies and address the issue of morals in markets.
KW - 2960
KW - 4200
KW - Market reaction
KW - Moral of markets
KW - Tax aggressiveness
KW - Tax avoidance
KW - Tax evasion
KW - Tax risk
UR - http://www.scopus.com/inward/record.url?scp=85064925817&partnerID=8YFLogxK
U2 - 10.1016/j.joep.2019.04.007
DO - 10.1016/j.joep.2019.04.007
M3 - Article
AN - SCOPUS:85064925817
VL - 72
SP - 278
EP - 292
JO - Journal of economic psychology
JF - Journal of economic psychology
SN - 0167-4870
ER -