Tax Transparency - an Analysis of the Luxleaks Firms

DOI

10.2991/icaat-16.2016.33How to use a DOI?

Keywords

Tax avoidance, transparency, Earnings Management

Abstract

This paper finds that the firms involved in the Luxembourg Leaks ('LuxLeaks') scandal are less transparent measured by the engagement in earnings management, analyst coverage, analyst accuracy, accounting standards and auditor choice. The analysis is based on the LuxLeaks sample and compared to a control group of large multinational companies. The panel dataset covers the years from 2001 to 2015 and comprises 19,109 observations. The LuxLeaks firms appear to engage in higher levels of discretionary earnings management measured by the variability of net income to cash flows from operations and the correlation between cash flows from operations and accruals. The LuxLeaks sample shows a lower analyst coverage, lower willingness to switch to IFRS and a lower Big4 auditor rate. The difference in difference design supports these findings regarding earnings management and the analyst coverage. The analysis concludes that the LuxLeaks firms are less transparent and infers a relation between corporate transparency and the engagement in tax avoidance. The paper aims to establish the relationship between tax avoidance and transparency in order to give guidance for future policy. The research highlights the complex causes and effects of tax management and supports a cost benefit analysis of future tax regulation.

Copyright

© 2016, the Authors. Published by Atlantis Press.

Open Access

This is an open access article distributed under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/).

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TY  - CONF
AU  - Johannes Manthey
AU  - Dirk Kiesewetter
PY  - 2016/12
DA  - 2016/12
TI  - Tax Transparency - an Analysis of the Luxleaks Firms
BT  - Proceedings of the 5th International Conference on Accounting, Auditing, and Taxation (ICAAT 2016)
PB  - Atlantis Press
SP  - 327
EP  - 344
SN  - 2352-5428
UR  - https://doi.org/10.2991/icaat-16.2016.33
DO  - 10.2991/icaat-16.2016.33
ID  - Manthey2016/12
ER  -