Consistent with an agency theory of tax avoidance, this study investigates the extent to which tax avoidance results in a less timely annual earnings announcement. Using 16,340 firm-years spanning the period 1993–2010, evidence is presented suggesting tax avoidance that manifests through greater temporary and permanent book-tax differences results in a less timely annual earnings announcement. This result is robust to including several controls previously documented to affect reporting delay, including the magnitude of the earnings surprise, size, profitability, auditor-related influences, shareholder composition, capital intensity, financial reporting aggressiveness and financial condition. Evidence is also presented suggesting that tax avoidance impacts the value-relevance of earnings to investors at the announcement date, evaluated by the earnings response coefficient.
Review of Quantitative Finance and Accounting – Springer Journals
Published: Jan 3, 2013
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