Is tax return information useful to equity investors?

Demere, Paul M

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https://hdl.handle.net/2142/97698 Copy

Description

Title

Is tax return information useful to equity investors?

Author(s)

Demere, Paul M

Issue Date

2017-04-14

Director of Research (if dissertation) or Advisor (if thesis)

Lisowsky, Petro

Doctoral Committee Chair(s)

Lisowsky, Petro

Committee Member(s)

• Donohoe, Michael
• Sougiannis, Theodore
• Johnson, Timothy

Department of Study

Accountancy

Discipline

Accountancy

Degree Granting Institution

University of Illinois at Urbana-Champaign

Degree Name

Ph.D.

Degree Level

Dissertation

Keyword(s)

• Tax return information
• Syndicated loans
• Tax expense valuation
• Tax anomaly returns

Abstract

In this study, I examine whether tax return information is incrementally useful to equity investors relative to publicly-available information, such as financial statements. To test this relation, I exploit unique features of the syndicated loan market, as prior literature shows that lenders obtain tax returns from borrowers, and that lenders’ private information is transmitted to equity markets when institutional investors are part of a loan syndicate. I find economically significant increases in tax expense valuation and decreases in tax-related market anomalies following the issuance of institutional syndicated loans, consistent with equity investors finding information about firm performance in tax returns that is useful for their trading decisions. I also document that tax returns are a valuable information source that can motivate institutional investor participation in loan syndicates. This study informs the important, ongoing policy debate over public disclosure of corporate tax return information and extends prior research by showing that investors use information from tax returns incremental to information in financial statements.

Graduation Semester

2017-05

Type of Resource

text

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http://hdl.handle.net/2142/97698

Copyright and License Information

Copyright 2017 Paul Demere

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