Tax Planning Activities and Firm Value: A Dynamic Panel Analysis

Abstract

The purpose of the study is to investigate the impact of tax planning activities on the firm value of FTSE 100 firms. We employ static and dynamic panel regression analyses on a sample of 70 companies drawn from the UK FTSE 100 over a five-year period (2006–2010). Empirical evidence suggests that tax planning activity as measured by the proxies based on reported accounting information has a negative impact on firm value. Moreover, the results from the Generalized Methods of Moments (GMM) models suggest significant dynamics in firm value, i.e., the current firm value is positively affected by the past firm value. The findings imply the need for a full review of the adequacy and relevance of tax accounting disclosure and therefore have policy implications for accounting standard setters.

Citation

Kirkpatrick, A.K. and Radicic, D. (2020), "Tax Planning Activities and Firm Value: A Dynamic Panel Analysis", Hasseldine, J. (Ed.) Advances in Taxation (Advances in Taxation, Vol. 27), Emerald Publishing Limited, Leeds, pp. 103-123. https://doi.org/10.1108/S1058-749720200000027004