TY - JOUR
T1 - Is there a relation between labor investment inefficiency and corporate tax avoidance?
AU - Taylor, Grantley
AU - Al-Hadi, Ahmed
AU - Richardson, Grant
AU - Alfarhan, Usamah
AU - Al-Yahyaee, Khamis
N1 - Publisher Copyright:
© 2019 Elsevier B.V.
PY - 2019/11
Y1 - 2019/11
N2 - This paper investigates the relation between labor investment inefficiency and corporate tax avoidance. Employing a large sample of 61,542 U.S. firm-year observations over the 1962–2014 period, our regression results show that labor investment inefficiency is significantly positively related to tax avoidance. More specifically, we find that a one standard deviation of labor investment inefficiency leads to a 0.71% reduction in the accounting effective tax rate. Our findings are robust to endogeneity concerns, alternative proxy measures of tax avoidance and labor investment efficiency, and additional control variables pertaining to accounting quality and managerial ability. Taken together, our regression results show that labor investment inefficiency is an important determinant of corporate tax avoidance.
AB - This paper investigates the relation between labor investment inefficiency and corporate tax avoidance. Employing a large sample of 61,542 U.S. firm-year observations over the 1962–2014 period, our regression results show that labor investment inefficiency is significantly positively related to tax avoidance. More specifically, we find that a one standard deviation of labor investment inefficiency leads to a 0.71% reduction in the accounting effective tax rate. Our findings are robust to endogeneity concerns, alternative proxy measures of tax avoidance and labor investment efficiency, and additional control variables pertaining to accounting quality and managerial ability. Taken together, our regression results show that labor investment inefficiency is an important determinant of corporate tax avoidance.
KW - Corporate tax avoidance
KW - Firm behavior
KW - Labor investment inefficiency
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U2 - 10.1016/j.econmod.2019.01.006
DO - 10.1016/j.econmod.2019.01.006
M3 - Article
AN - SCOPUS:85073451413
SN - 0264-9993
VL - 82
SP - 185
EP - 201
JO - Economic Modelling
JF - Economic Modelling
ER -