Aug. 15, 2018
While attending the 2018 American Accounting Association Annual Meeting in National
Harbor,
Maryland, School of Accounting assistant professor Chelsea Rae Austin received the
2017 Journal of
American Taxation Association Outstanding Paper Award for her paper, “An Examination
of
Reputational Costs and Tax Avoidance: Evidence from Firms with Valuable Consumer Brands,”
published
in spring 2017.
Austin co-authored the paper with Ryan Wilson (University of Oregon, Lundquist College
of Business).
Austin states that the topic of this paper evolved from her interest in “the determinants
and
consequences of tax avoidance.” In this paper, Austin and Wilson found that valuable
brand ownership
is a deterrent to tax avoidance.
Abstract
We expect firms with the greatest exposure to reputational damage among consumers
will engage in
lower levels of tax avoidance to minimize unwanted scrutiny that could impair the
firms' reputation. We
identify a set of firms with valuable consumer reputation using Harris Interactive's
EquiTrend survey,
which surveys consumers about their perceptions of valuable and prominent brands.
We find evidence in
support of our hypothesis that firms with valuable brands will engage in less tax
avoidance. Specifically,
we find a positive and significant association between our measure of reputation and
both the GAAP and
cash effective tax rates (measured over one and three years). We find mixed evidence
on whether there
is a negative and significant association between reputation and the probability the
firm is engaging in tax
sheltering.