Abstract

Prior literature that analyzed the relationship between corporate tax avoidance and firm value has used a tax avoidance measure developed by Desai and Dharmapala(2006). This measure, however, can not explain the tax sheltering activities using discretionary accrual components. In this paper, we analyze 2,507 firm/year observations listed in the KOSPI market 2001- 2010 period. Tax avoidance is measured by Desai and Dharmapala(2006). Firm value is measured using Tobin’s Q. Accrual components are measured using DBTC and DBOA suggested by Calegari(2000). We find following empirical results. Lower BTCD aggravate a negative effect on the relationship between tax avoidance and firm value and higher DBOA mitigate a negative effect on the relationship between tax avoidance and firm value. This paper contributes to the literature by analyzing the impact of discretionary accrual components such as DBTC and DBOA on the relationship between tax avoidance and firm value.

Keywords

• Tax Avoidance
• Firm Value
• Discretionary Book Tax Conformity Accruals
• Discretionary Book-only Accruals

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