공격적인 세무보고와 불투명한 재무보고의 관계

Abstract

We examines whether a positive relation between aggressive tax reporting and opacity in financial reporting or aggressive financial reporting. Prior research finds a positive relationship between tax reporting aggressiveness and financial reporting aggressiveness (e.g. Frank et al. 2009; Heltzer et al. 2015). In contrast, domestic research find that tax aggressiveness is negatively related to financial reporting aggressiveness (e.g., Shin et al. 2001; Kim et al. 2012; Ko et al. 2012). Thus, there are competing arguments and mixed prior evidence on whether firms that are aggressive in their tax reporting exhibit more or less financial aggressiveness. However, previous research mainly focus on a single year measure to capture potential both aggressive financial reporting and aggressive tax positions. Unlike that, this analysis reflects that we are eager to comprehensively examine our research question by gauging both aggressive tax reporting and aggressive financial reporting in alternate ways in order to help empirically settle whether firms undertaking aggressive tax positions are more aggressive in their financial reporting given the mixed prior research on this issue. In particular, our focus is on the relations between the firm’s tax aggressiveness and accounting measures of opacity in financial reporting, measured either over a multi-year period or a single year. In this study, we use three accounting based measures of opacity in financial reporting – we use are: Hutton et al. (2009), Jeon and Park (2017), and our study is suggested by new method (e.g., RM is based Roychowdhury (2006) model, we construct an overall RM proxy by summing abnormal levels of cash flow from operations, production costs, and discretionary expenditures, thus OPACITY3 is calculated as average of a three-year moving sum of overall RM proxy to capture the multi-year effect of real earnings management, which is calculated over years t-2 through t.). Following Hutton et al. (2009), we then calculate our first proxy for financial reporting opacity (hereafter OPACITY1) in year t as the three-year moving sum of the absolute value of annual discretionary accruals, which is calculated over years t-2 through t. As well, following Jeon and Park (2017), we then calculate our second proxy for financial reporting opacity (hereafter OPACITY2) in year t as the standard deviation of discretionary accruals, which is calculated over years t-2 through t. Thus, the first three proxies, OPACITY1 to OPACITY3 are grounded in accrual-based as well as real earnings management activity for opacity in financial reporting. We also use the Dechow et al. (1995) model and the Kothari et al. (2005) return on assets (ROA)-performance-controlled-discretionary accrual model to estimate the discretionary accruals (hereafter DA and DAK, respectively), as well as the Roychowdhury (2006) model to estimate the real earnings management activities (RM). We use four tax aggressive measures, specifically we gauge firms’ tax burdens with several proxies for both book-tax differences (e.g., BTD and DDBTD (i.e., discretionary BTD) developed by Desai and Dharmapala (2006) utilize the residuals from regressions, which estimate the effect of total accruals on book-tax differences.) and the long-run effective tax rates (e.g., Cash ETR and GAAP ETR developed by Dyreng et al. (2008)). Following Dyreng et al. (2008), we calculate the Cash (GAAP) ETR as the ratio of the sum of the cash tax payments (tax expense) over a five-year period to the sum of income before taxes and special items over the same five-year period. Sample firms are collected from the Korea Exchange from 2003 to 2016 using the KIS Value Library database. We consider 7,730 firm-year observations for sample firm satisfying of the criteria for the sample period. Our main results are as follows. First, after controlling for several factors that affect opacity in financial reporting, we find a strong, positive relation between aggressive tax reporting (i.e., BTD, DDBTD, Cash ETR and GAAP ETR) and opacity in financial reporting (i.e., OPACITY1∼OPACITY3) as measures by a multi-years. Overall, the results of these analyses support our expectations that tax and financial reporting aggressiveness are positively related. This is, firms with more aggressive tax reporting are more opacity in financial reporting. Second, we find a strong, positive relation between aggressive tax reporting (i.e., BTD, DDBTD, Cash ETR and GAAP ETR) and opacity in financial reporting (i.e., DA, DAK and RM) as measures by a one-year. In other words, this results shows that firms which engage in aggressive tax reporting, is simultaneously engage in aggressive financial reporting. In multivariate analysis and despite alternative specifications, we find broadly consistent with prior research (Frank et al. 2009). Lastly, following Donohoe and Knechel (2014), we create indicator variables that equal 1 for firms in the highest quintile of BTD, DDBTD, and indicator variables that equal 1 for firms in the lowest quintile of Cash ETR, GAAP ETR, respectively. We find similar results. For examples, in both regressions, the coefficients on BTD or DDBTD are positive and significant, consistent with a positive relation between tax and financial reporting aggressiveness (i.e., OPACITY1∼OPACITY3, DA, DAK and RM), Whereas, in both regressions, the coefficients on Cash ETR or GAAP are positive and significant, consistent with a positive relation between tax and financial reporting aggressiveness (i.e., OPACITY3 or RM). In summary, we consistently find a positive and significant relation between tax and financial reporting aggressiveness. Namely, this positive relation persists across four different proxies for tax reporting aggressiveness (i.e., BTD, DDBTD, Cash ETR, and GAAP ETR) as well as across four different proxies for financial reporting aggressiveness (i.e., OPACITY1∼OPACITY3, DA, DAK, RM). Therefore, we conclude that the positive relation between tax and financial aggressiveness is robust. So, there are competing arguments and mixed evidence on whether firms that are aggressive in their tax reporting exhibit more financial aggressiveness. Our research contributes to empirically resolving this issue by estimating the relation between aggressive tax planning and aggressive financial reporting. Also, our finding has garnered much attention from academics, as well as investors, policy-makers and practitioners because firms with more aggressive tax reporting are more opacity in financial reporting, which can be a “red flag”.