Abstract

This study investigates the long－term effect of being designated as a ‘trusted tax payer’ by the National Tax Service on the firm value. For those firms with higher information asymmetry in particular, the study verifies whether the designation as a trusted tax payer has a positive effect on firm value. We examined 122 KOSPI and KOSDAQ market listed companies designated as trusted tax payers from 2011 to 2015. The empirical results show that firm value measured as cumulative abnormal return significantly increased after the firm was designated as a trusted tax payer, suggesting that being designated as a trusted tax payer appears to enhance reputation and reliability of a company in the capital market, and consequently to increase firm value. In addition, we find that the results are hold only for the firms with relatively higher information asymmetry measured as stock volatility, accrual quality, and analyst following. The results imply that firms with higher information asymmetry may experience greater benefit as the firm is designated as a trusted tax payer. This study is meaningful in that it examines the designation as a trusted tax payer has a positive effect on firm value, which has not dealt with before in the prior research. We expect that the results in this study provide useful information to managers as well as regulators.

Keywords

• trusted taxpayer
• information asymmetry
• firm value
• cumulative abnormal return

Related Articles

• Voluntary Disclosure of Corporate Governance Report and Firm Value

  Yeo－Jin Kim , Ahn Sunghee

  21(2) 127-156

  Abstract Full Text for PDF

• The Simultaneously Joint Relations Among Foreign Ownership, Forecast Accuracy and Firm Value

  Yoonyoung Ahn

  7(2) 57-78

  Abstract Full Text for PDF

• Earnings Downside Risk and Cost of Debt Capital

  Sungmin Jeon , Sang Hyuk Lee

  26(5) 63-87

  Abstract Full Text for PDF

• Changes in the Mitigating Effect of Corporate Governance on Information Asymmetry During the Pandemic：Focusing on Foreign Investors and Big4 Auditors

  Yoojin Shin , Boram Choi

  26(4) 27-51

  Abstract Full Text for PDF

• A Study on the Requirements of Value－upCompanies under the Estate Tax Act

  Chung－Jin Shim

  25(6) 75-100

  Abstract Full Text for PDF