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- Title
A REVIEW OF RESEARCH ON CORPORATE TAX AGGRESSIVENESS AND THE LEVERAGE PUZZLE.
- Authors
Nguyen, H. Khiem (jonathan)
- Abstract
This article reviews previous research on the relationship between corporate tax aggressiveness and leverage and shows that the puzzle remains unsolved. Mixed findings are reported in prior literature. Four main propositions from previous studies to explain this relationship are discussed in this paper: debt interest deductibility; non-debt tax shields; debtholders' concerns about managerial rent extraction; and uncertainty about the future cash flows of tax avoiders. This review paper suggests four main factors to account for the inconsistent results in past empirical studies: the causal or bi-directional relationship between tax aggressiveness and debt; proxies for tax aggressiveness; measures of firm leverage; and the endogeneity of corporate tax status. Suggestions are provided for future research on the tax aggressiveness and leverage puzzle with a view to reconciling the mixed findings in the existing literature.
- Subjects
INCOME tax evasion; FINANCIAL leverage; CORPORATE tax accounting; ACCOUNTING
- Publication
Journal of the Australasian Tax Teachers Association, 2016, Vol 11, Issue 1, p139
- ISSN
1832-911X
- Publication type
Article