Debt Maturity and Tax Avoidance
Year: 2015
Type: article
Abstract: This study proposes and empirically tests the argument that creditors are likely to extend debt with a shorter maturity to tax-avoiding firms so that they can frequently re-evaluate tax-related risk in debt contracting. Using effective tax rates and uncertain tax benefits as a proxy for tax avoidance, I find that tax-avoiding firms have a larger proportion of short-maturity debt compared to other firms. The empirical findings further show that firms with unsustainable tax positions and with subsidiaries in tax-haven countries are more likely to employ short-maturity debt. Collectively, the empirical findings suggest that frequent debt renegotiations increase the exposure of tax-avoiding firms to credit supply shocks, contributing to their higher demand for cash.
Source: European Accounting Review
Author: Petya Platikanova
Institution: Esade
Language: English
Subfield: Accounting
Domain: Social Sciences
Open Access status: green
Funder: Generalitat de Catalunya
OpenAlex ID: W2193319909