Title
Business groups, taxes and accruals management Business groups, taxes and accruals management
Author
Faculty/Department
Faculty of Applied Economics
Publication type
report
Publication
Antwerp :UA, [*]
Subject
Economics
Source (series)
Research paper / Ua, Faculty of Applied Economics ; 2006:15
Volume/pages
45 p.,
Carrier
E
Target language
English (eng)
Affiliation
University of Antwerp
Abstract
This paper provides evidence that Belgian firms belonging to a business group have a lower effective tax rate (ETR) and face a less positive association between pre-tax income and ETRs than independent firms. These findings suggest that individual group members apply efficient tax planning techniques in order to minimize taxes at the group level. We hypothesize that group firms strategically adjust firm-level reported earnings levels in response to tax incentives. We find evidence consistent with this hypothesis, in that the intrinsic negative association between total accruals and operating cash flows is more (less) pronounced for group firms facing a positive (zero) marginal tax rate status, compared to independent firms. In addition, we find that a group firms net tax-paying situation is more important in its discretionary accruals reporting decisions, compared to independent firms. Finally, we identify intra-group receivables as relevant tax-reducing accruals components. Results are robust to alternative model specifications, variable definitions and measures.
Full text (open access)
https://repository.uantwerpen.be/docman/irua/46e01d/ea538bb5.pdf
Handle