Kuo, J. S., Ko, C. Y., Wu, D. K., and Ho, Y. C. 2024. Do Tax Risk and Tax Avoidance Affect Firm Value?. NTU Management Review, 34 (3): 1-46. https://doi.org/10.6226/NTUMR.202412_34(3).0002
Jenn-Shyong Kuo, Department of Accountancy, National Taipei University
Chen-Ying Ko, National Taxation Bureau of Taipei, Ministry of Finance
Da-Kai Wu, Department of Accounting, Feng Chia University
Yi-Cheng Ho, Department of Public Finance, National Chengchi University
Abstract
This paper examines the impact that tax risk and tax avoidance, both individually and jointly, have on firm value. Using the data of listed companies in Taiwan from 2000-2019, the results of measuring tax avoidance and tax risk with the cash effective tax rate suggest that investors negatively value tax risk while positively value tax avoidance; moreover, tax risk moderates the positive valuation of tax avoidance. In addition, we find that across different tax systems or tax rate periods, tax avoidance and tax risk have roughly the same impact on firm value; however, the magnitude of the impact varies in some periods. Overall, compared with prior literature on firm value that has mostly focused on tax avoidance, the empirical results of this study show that future researchers should also consider the interaction between tax risk and tax avoidance.
Keywords
tax risktax avoidancefirm value