The effect of cost asymmetry on future tax avoidance

IF 3.3 Q1 BUSINESS, FINANCE

Journal of International Accounting Auditing and Taxation Pub Date : 2025-01-17 DOI:10.1016/j.intaccaudtax.2025.100681

Constantinos Chalevas, Dimitrios Ntounis , Orestes Vlismas

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引用次数: 0

Abstract

This study explores the relationship between cost asymmetry and future tax avoidance. Cost stickiness is positively associated with adjustment costs, more optimistic managerial expectations of future performance, and intense managerial empire-building behavior. We expect that higher adjustment costs will increase future requirements for internal financing via tax avoidance. Additionally, self-interested managerial behavior and managerial expectations of improved performance and higher tax burden may enhance managers’ motives to engage in tax avoidance. We find a positive relationship between the prior period’s cost stickiness and the current period’s tax avoidance using a sample of 30,923 firm-year observations of US listed companies over the 2000–2019 period. Our results are more pronounced for firms with high adjustment costs and firms with high managerial expectations of future sales. The level of accrual earnings does not seem to affect our empirical results, which remain robust to alternative measures of tax avoidance, differences rather than levels in the variables, and macroeconomic event shocks. These findings remain consistent when the data are partitioned into samples and propensity scored for cost asymmetry.

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来源期刊

Journal of International Accounting Auditing and Taxation BUSINESS, FINANCE-

CiteScore

4.50

自引率

3.80%

发文量

期刊介绍： The Journal of International Accounting, Auditing and Taxation publishes articles which deal with most areas of international accounting including auditing, taxation and management accounting. The journal''s goal is to bridge the gap between academic researchers and practitioners by publishing papers that are relevant to the development of the field of accounting. Submissions are expected to make a contribution to the accounting literature, including as appropriate the international accounting literature typically found in JIAAT and other primary US-based international accounting journals as well as in leading European accounting journals. Applied research findings, critiques of current accounting practices and the measurement of their effects on business decisions, general purpose solutions to problems through models, and essays on world affairs which affect accounting practice are all within the scope of the journal.