The value relevance of taxes: International evidence on the proxy for profitability role of tax surprise |
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| Institution: | 1. Smeal College of Business, Pennsylvania State University, PA, USA;2. Gies College of Business, University of Illinois at Urbana-Champaign, IL, USA;3. School of Accountancy, Shanghai University of Finance and Economics, Shanghai, PR China;1. Fisher College of Business, The Ohio State University, 2100 Neil Avenue, Columbus, OH 43210, United States;2. Rotman School of Management, University of Toronto, 105 St. George Street, Toronto, ON M5S 3E6, Canada;3. Carlson School of Management, University of Minnesota, 321 19th Avenue S., Minneapolis, MN 55455, United States |
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| Abstract: | Despite evidence that tax surprise is incrementally value relevant, the literature has done little to broaden the investigation beyond the United States or examine circumstances that affect informativeness. After extending to the international setting, I examine the impact of tax enforcement. I report strong results of greater value relevance when tax enforcement is high and that the value relevance of tax surprise is mostly contained within its interaction with tax enforcement. These findings highlight the importance of tax enforcement in determining the information content of tax surprise and suggest that extant and future discussions should be broadened to include it. |
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