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ifo Institut – Leibniz-Institut für Wirtschaftsforschung an der Universität München >
CESifo Working Papers, CESifo Group Munich >
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http://hdl.handle.net/10419/46539
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| Title: | | Taxes and financial reporting: Evidence from discretionary investment write-offs in Italy  |
| Authors: | | Arachi, Giampaolo Bucci, Valeria |
| Issue Date: | | 2010 |
| Series/Report no.: | | CESifo working paper: Public Finance 3261 |
| Abstract: | | This paper provides further empirical evidence on the relationship between taxes and financial reporting by focusing on accounting decisions to write-offs equity investments. The analysis is based on panel data for Italian companies. In the period 1998-2006 the Italian corporate income tax has been reformed several times. In particular the tax deductibility of write-offs of equity investment was repealed in 2004. The paper exploits the ensuing high cross-sectional and times series variation in the marginal tax rate to identify tax effects. The econometric analysis delivers strong evidence that taxes affect the probability of write-offs. In contrast there is no evidence that taxes affect the magnitude of the write-offs. The paper also tests for the existence of a trade-off between tax minimization and non tax costs such as financial reporting costs and agency costs. Surprisingly, the evidence of such trade-off is rather weak. |
| Subjects: | | corporate taxation write-offs of equity investments financial reporting tax planning |
| JEL: | | H25 H32 K34 M41 |
| Document Type: | | Working Paper |
| Appears in Collections: | | CESifo Working Papers, CESifo Group Munich
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