Tax Avoidance and Accounting Conservatism

Bornemann, Tobias (2018) Tax Avoidance and Accounting Conservatism. WU International Taxation Research Paper Series, 2018-04. WU Vienna University of Economics and Business, Universität Wien, Vienna.


Download (836kB)


This study analyzes the relation between accounting conservatism, future tax rate cuts and countries' level of book-tax conformity. Firms have an incentive to increase conservatism in financial reporting when a tax rate cut is imminent to shift taxable income into the lower taxed future. Using a panel of firms across 18 countries from 1995 to 2010 I find that conditional conservatism is positively and significantly associated with future tax rate cuts when book-tax conformity is high. This effect is particularly pronounced for firms that concentrate the majority of their operations in the country in which the tax rate is cut. In contrast, there is no significant relation between future tax rate cuts and unconditional conservatism.

Item Type: Paper
Additional Information: Financial support by the Austrian Science Fund (FWF): W1235-G16 is gratefully acknowledged. Editors: Eva Eberhartinger, Michael Lang, Rupert Sausgruber and Martin Zagler (Vienna University of Economics and Business), and Erich Kirchler (University of Vienna)
Keywords: accounting conservatism, tax rate cuts, book-tax conformity
Classification Codes: JEL H21, H25, M4, M41
Divisions: Departments > Finance, Accounting and Statistics > Accounting and Auditing > Betriebswirtschaftliche Steuerlehre
Depositing User: Mohammad Al Hessan
Date Deposited: 15 Feb 2018 12:32
Last Modified: 22 Oct 2019 00:41


View Item View Item


Downloads per month over past year

View more statistics