Tax Risk, Implied Cost of Capital, and Large Business Conglomerates
0
조회
0
다운로드
1
인용
0
참고문헌
키워드
초록
Guenther et al. (2017) find that firms with high tax risks have increased uncertainty in future cash flows. Therefore, as firm risk increases, the required return of shareholders increases. Tax risk is an important factor that indicates the sustainability of tax management. A sustainable tax strategy affects not only firm management but also investor decision-making. The Large Business Conglomerates refers to a firm that owns several affiliates and has huge financial power and huge capital. Large Business Conglomerates firms are required to disclose various information such as corporate finances and taxation according to the large-scale corporate group disclosure system. Therefore, investors demand accurate information about Large Business Conglomerates firms. This study is conducted from two perspectives. First, we examine the effect of tax risk on the implied cost of capital. Second, we examine whether the relationship between implied cost of capital and tax risk differs depending on the Large Business Conglomerates. As the results, first, tax risk positively related to implied cost of capital. Investors perceive tax-related uncertainty as a risk, resulting in a high cost of capital. We find that tax risk increases the cost of financing. Second, the positive relationship between implied cost of capital and tax risk was weakened in the firms affiliated with Large Business Conglomerates. We find that Large Business Conglomerates firms have more resource and experience to reduce tax risk than firms unaffiliated with Large Business Conglomerates. Our findings that sustainable tax planning affects financing costs provide useful information for investors and managers. By empirically demonstrating that investors assess tax risk differently based on whether they are affiliates of Large Business Conglomerates or not, it offers vital evidence to corporate stakeholders.
Abstract
Guenther et al. (2017) find that firms with high tax risks have increased uncertainty in future cash flows. Therefore, as firm risk increases, the required return of shareholders increases. Tax risk is an important factor that indicates the sustainability of tax management. A sustainable tax strategy affects not only firm management but also investor decision-making. The Large Business Conglomerates refers to a firm that owns several affiliates and has huge financial power and huge capital. Large Business Conglomerates firms are required to disclose various information such as corporate finances and taxation according to the large-scale corporate group disclosure system. Therefore, investors demand accurate information about Large Business Conglomerates firms. This study is conducted from two perspectives. First, we examine the effect of tax risk on the implied cost of capital. Second, we examine whether the relationship between implied cost of capital and tax risk differs depending on the Large Business Conglomerates. As the results, first, tax risk positively related to implied cost of capital. Investors perceive tax-related uncertainty as a risk, resulting in a high cost of capital. We find that tax risk increases the cost of financing. Second, the positive relationship between implied cost of capital and tax risk was weakened in the firms affiliated with Large Business Conglomerates. We find that Large Business Conglomerates firms have more resource and experience to reduce tax risk than firms unaffiliated with Large Business Conglomerates. Our findings that sustainable tax planning affects financing costs provide useful information for investors and managers. By empirically demonstrating that investors assess tax risk differently based on whether they are affiliates of Large Business Conglomerates or not, it offers vital evidence to corporate stakeholders.
참고문헌 (25)
- Allen, A., "Analyst coverage and corporate tax aggressiveness", Journal of Banking & Finance, 73, pp.84~98 (2016)
- Amihud, Y, "Asset pricing and the bid-ask spread", Journal of Financial Economics, 17(2), pp.223~249 (1986)
- Austin, C., "An examination of reputational costs and tax avoidance : Evidence from firms with valuable consumer brands", The Journal of the American Taxation Association, 39(1), pp.67~93 (2017)
- Botosan, C., "The relation between expected returns, realized returns, and firm risk characteristics", Contemporary Accounting Research, 28(4), pp.1085~1122 (2011)
- Brealey, R., "Principles of Corporate Finance" (2011), McGraw Hill-Irwin
- Campbell, T. L., "Corporate Governance in South Korea : The Large Business Conglomerates Experience", Journal of Corporate Finance, 8(4), pp.373~391 (2002)
- Drake, K, "Does tax risk affect investor valuation of tax avoidance?", Journal of Accounting, Auditing & Finance, 34(1), pp.151~176 (2019)
- Dyreng, S., "Long-run corporate tax avoidance", The Accounting Review, 83(1), pp.61~82 (2008)
- Easton, P., "PE ratios, PEG ratios, and estimating the implied expected rate of return on equity capital", The Accounting Review, 79(1), pp.73~95 (2004)
- Francis, J., "The market pricing of accruals quality", Journal of Accounting and Economics, 39, pp.295~327 (2005)
- Gallemore, J., "The importance of the internal information environment for tax avoidance", Journal of Accounting and Economics, 60, pp.149~167 (2015)
- Gode. D., "Inferring the cost of capital using the Ohlson-Juettner model", Review of Accounting Studies, 8, pp.399~431 (2003)
- Guenther, D. A., "Is tax avoidance related to firm risk?", The Accounting Review, 92(1), pp.115~136 (2017)
- Hope, O., "Tax avoidance and geographic earnings disclosure", Journal of Accounting and Economics, 56, pp.170~189 (2013)
- Does greater tax risk lead to increased firm risk?, "Hutchens, M.", Indiana University, ~ (2017)
- Kubick, T., "Product Market Power and Tax Avoidance : Market Leaders, Mimicking Strategies, and Stock Returns", The Accounting Review, 90(2), pp.675~702 (2015)
- Lang, M., "Concentrated control, analyst following, and valuation : Do analysts matter most when investors are protected least", Journal of Accounting Research, 42, pp.589~623 (2004)
- Lintner, J., "The valuation of risk assets and the selection of risky investments in stock portfolios and capital budgets", The Review of Economics and Statistics, 47, pp.13~37 (1965)
- McGuire S. T., "Tax Avoidance : Does Tax-Specific Industry Expertise Make a Difference?", The Accounting Review, 87(3), pp.975~1003 (2012)
- Neuman, S. S., "Assessing tax risk : Practitioner perspectives", Contemporary Accounting Research, 37(3), pp.1788~1827 (2020)
- Ohlson, J., "Expected EPS and EPS growth as determinants of value", Review of Accounting Studies, 10, pp.349~365 (2005)
- 박헌준, "기업 투명성과 기업 가치", 경영학연구, 35(5), pp.1361~1391 (2006), 한국경영학회
- Tax Spike Firms, "Saavedra, D.", UCLA Anderson School of Management, ~ (2015)
- Sharpe, W., "Capital asset price : A theory of market equilibrium under conditions of risk", Journal of Finance, 19, pp.425~442 (1964)
- 임상균, "대규모기업집단 소속기업의 투자효율성", 회계학연구, 39(3), pp.91~134 (2014), 한국회계학회