Reporting, Financial, and Firm Value Consequences of Avoiding Taxes

Purpose of the paper. The empirical studies on corporate tax avoidance have grown to a considerable level over the past two decades. However, this research has mostly focused on the determinants of corporate tax avoidance, and much less is known on the economic consequences of avoiding taxes. This paper fills this research gap. We synthesize and review the relevant research on the financial reporting, cost of capital, and firm value consequences of corporate tax avoidance of the past two decades. We focus on reporting, financial, and firm value consequences of avoiding taxes because these topics are paramount for accounting and finance scholars undertaking tax research.-Methodology. To thoroughly evaluate extant research, we rely on the “Scholes-Wolfson” theoretical framework because it allows us to not only organize all empirical studies published in the top accounting and finance journals over the last two decades, but also to identify potential inconsistencies and fruitful paths for...