Beauty is in the eye of the beholder: : The effect of corporate tax avoidance on the cost of bank loans

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Title: Beauty is in the eye of the beholder: : The effect of corporate tax avoidance on the cost of bank loans
ISBN: 978-952-6699-65-3
Author: Hasan, Iftekhar ; Wu, Qiang ; Zhang, Hao ; Hoi, Chun-Keung (Stan)
Organization: Bank of Finland
Series: Bank of Finland Research Discussion Papers
ISSN: 1456-6184
Series year: 2014
Series number: 3/2014
Year of publication: 2014
Publication date: 14.1.2014
Published in: Published in Journal of Financial Economics, 113 (2014) 109-130
DOI: 10.1016/j.jfineco.2014.03.004
Pages: 67
Keywords: yritykset; verotus; pankkitoiminta; luotot; kustannukset; rahoitus; riskit; joukkovelkakirjat; veronkierto
JEL: G21; H26
Abstract: We find that firms with greater tax avoidance incur higher spreads when obtaining bank loans. This finding is robust in a battery of sensitivity analyses and in two quasi-experimental settings including the implementation of Financial Accounting Standards Board Interpretation No. 48 and the revelation of past tax sheltering activity. Firms with greater tax avoidance also incur more stringent non-price loan terms, incur higher at-issue bond spreads, and prefer bank loans over public bonds when obtaining debt financing. Overall, these findings indicate that banks perceive tax avoidance as engendering significant risks. JEL Classification: G21; H26 Keywords: Tax avoidance; Cost of bank loans; Information risk; Agency risk; Audit risk; FIN 48
Note: Ilmestynyt myös JOURNAL OF FINANCIAL ECONOMICS 2014.
Rights: https://helda.helsinki.fi/bof/copyright


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