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Do Firms Engage In Aggressive Tax Reporting Prior To Bankruptcy?

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  • Wendy Heltzer
  • Mary Mindak
  • Mingjun Zhou

Abstract

Our study examines the tax reporting behaviors of firms just before they file for bankruptcy (prebankruptcy firms). Specifically, we investigate whether pre-bankruptcy firms engage in more aggressive tax reporting, in comparison to non-bankruptcy firms. We also investigate whether the relationship between aggressive financial reporting and aggressive tax reporting is different across pre-bankruptcy and non-bankruptcy firms. Our findings suggest that pre-bankruptcy firms engage in more aggressive tax reporting, vis-Ã -vis non-bankruptcy firms. Additionally, we find that the positive relation between aggressive book reporting and aggressive tax reporting is stronger among pre-bankruptcy firms, vis-Ã -vis firms that are not approaching bankruptcy. Thus, our findings not only further our understanding of the motivations behind these significant reporting decisions, but also help us understand how a growing proportion of corporate managers respond to increasing pressures to perform in a depressed economy.

Suggested Citation

  • Wendy Heltzer & Mary Mindak & Mingjun Zhou, 2015. "Do Firms Engage In Aggressive Tax Reporting Prior To Bankruptcy?," Accounting & Taxation, The Institute for Business and Finance Research, vol. 7(2), pages 1-15.
    • Handle: RePEc:ibf:acttax:v:7:y:2015:i:2:p:1-15
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    References listed on IDEAS

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    1. Chen, Shuping & Chen, Xia & Cheng, Qiang & Shevlin, Terry, 2010. "Are family firms more tax aggressive than non-family firms?," Journal of Financial Economics, Elsevier, vol. 95(1), pages 41-61, January.
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    3. Clive Lennox & Petro Lisowsky & Jeffrey Pittman, 2013. "Tax Aggressiveness and Accounting Fraud," Journal of Accounting Research, Wiley Blackwell, vol. 51(4), pages 739-778, September.
    4. Hanlon, Michelle & Heitzman, Shane, 2010. "A review of tax research," Journal of Accounting and Economics, Elsevier, vol. 50(2-3), pages 127-178, December.
    5. Sonja Olhoft Rego & Ryan Wilson, 2012. "Equity Risk Incentives and Corporate Tax Aggressiveness," Journal of Accounting Research, Wiley Blackwell, vol. 50(3), pages 775-810, June.
    6. Rebecca L. Rosner, 2003. "Earnings Manipulation in Failing Firms," Contemporary Accounting Research, John Wiley & Sons, vol. 20(2), pages 361-408, June.
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    Cited by:

    1. Nurul Aisyah Rachmawati1 & Sidharta Utama & Dwi Martani & Ratna Wardhani, 2020. "Do Country Characteristics Affect the Complementary Level of Financial and Tax Aggressiveness?," Asian Academy of Management Journal of Accounting and Finance (AAMJAF), Penerbit Universiti Sains Malaysia, vol. 16(1), pages 45-62.

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    More about this item

    Keywords

    Tax Reporting; Bankruptcy; Aggressive Reporting;
    All these keywords.

    JEL classification:

    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation

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