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Korean Academic Society of Business Administration
[ Article ]
korean management review - Vol. 51, No. 3, pp.705-727
ISSN: 1226-1874 (Print)
Print publication date 30 Jun 2022
Received 14 Sep 2021 Revised 07 Feb 2022 Accepted 23 Feb 2022
DOI: https://doi.org/10.17287/kmr.2022.51.3.705

시장 불확실성이 기업 조세회피 전략에 미치는 영향

Gun Lee ; Jae Eun Shin
(First Author) Accounting Department, Changwon National University gunlee@changwon.ac.kr
(Corresponding Author) School of Industrial Management, Korea University of Technology & Education(KOREATECH) jeshin@koreatech.ac.kr
The Effect of Market Uncertainty on Corporate Tax Avoidance


Copyright 2011 THE KOREAN ACADEMIC SOCIETY OF BUSINESS ADMINISTRATION
This is an open access article distributed under the terms of the Creative Commons Attribution License 4.0, which permits unrestricted, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

This study examines the relationship between market uncertainty and tax avoidance. We can make two distinct predictions on how uncertainty affects tax avoidance. On the one hand, uncertainty increases the precautionary motive of holding cash, and managers may increase the level of tax avoidance as a way of reducing cash outflow. On the other hand, uncertainty increases the value of waiting to invest and from the point of view that tax avoidance strategy is one of many alternative investment strategies, managers may decrease the level of tax avoidance under uncertainty. We empirically examine how uncertainty affects tax avoidance and further examine firm value implications of tax avoidance. Using 9,687 firm-year observations for the period from 2005 to 2020, we provide evidence that managers reduce the risky and aggressive forms of tax avoidance under uncertainty, and that the negative effect of aggressive tax planning on firm value is mitigated.

Keywords:

Market uncertainty, VKOSPI, Tax avoidance, Firm value

Acknowledgments

This paper was supported by the new professor research program of KOREATECH in 2022.

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∙ The author Gun Lee is an associate professor at Accounting Department, Changwon National University. His research interests include value relevance of accounting information, and top management structure and performance evaluation.

∙ The author Jae Eun Shin is an assistant professor at School of Industrial Management, Korea University of Technology & Education. Her research interests include earnings informativeness, earnings management, and corporate governance.