Date of Award
2016
Document Type
Dissertation
Degree Name
Ph.D. in Accountancy
Department
Accountancy
First Advisor
Tonya Flesher
Second Advisor
John P. Bentley
Third Advisor
Brett Cantrell
Relational Format
dissertation/thesis
Abstract
Recently, managers of U.S. corporations have explained the motivation behind engaging in extreme and public forms of tax avoidance (i.e. corporate inversions) as addressing the inability to gain or maintain global competitive advantages (Security 2014, 1). While prior research explores how a corporation’s overall business strategy can affect tax avoidance behavior (Higgins et al. 2015) and measures the effects of different components of competitive advantages on tax avoidance (Kubick et al. 2015; Gao et al. 2015), how total global competitive advantages impact tax avoidance remains an unanswered empirical question. Therefore, this study considers the following research questions: 1)How does the effective tax rate of a corporation affect the future competitive advantages of a corporation? and 2) How do competitive advantages affect future tax avoidance? To address these questions, this dissertation uses competitive effort proxies derived from accounting data (Dickinson and Sommers 2012), to develop a composite score measuring the corporation’s total global competitive advantages and examines the impact of total global competitive advantages on different proxies for tax avoidance. The results of several univariate and multivariable tests indicate that while effective tax rate measurements do not appear to inhibit the competitive advantages of corporations, corporate executives behave as if they believe the tax rate hinders their ability to compete; as competitive advantages rise, so does the likelihood that the corporation will engage in tax avoidance activities. However, a trend reversal occurs and those corporations with the highest competitive advantages decrease tax avoidance activities. An analysis of the corporations that invert show that they actually decrease in their competitive advantages in the second year after the inversion, which makes them significantly lower than their closest industry peers based on profitability. This study adds to the growing research on the determinants of tax avoidance. It also develops a new composite measurement of total global competitive advantages, which can be useful to future research in strategic management. The results of these analyses should also be of interest to legislators. Corporations continually call for legislation to overhaul the tax code; before doing so, legislators should be aware of the true determinants of problems (such as inversions) before trying to devise a solution.
Recommended Citation
Almand, Andrew Dale, "The Effect Of Competitive Advantages On Corporate Tax Avoidance: A Determinant Or Excuse?" (2016). Electronic Theses and Dissertations. 351.
https://egrove.olemiss.edu/etd/351