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Title:Is tax return information useful to equity investors?
Author(s):Demere, Paul M
Director of Research:Lisowsky, Petro
Doctoral Committee Chair(s):Lisowsky, Petro
Doctoral Committee Member(s):Donohoe, Michael; Sougiannis, Theodore; Johnson, Timothy
Department / Program:Accountancy
Degree Granting Institution:University of Illinois at Urbana-Champaign
Subject(s):Tax return information
Syndicated loans
Tax expense valuation
Tax anomaly returns
Abstract:In this study, I examine whether tax return information is incrementally useful to equity investors relative to publicly-available information, such as financial statements. To test this relation, I exploit unique features of the syndicated loan market, as prior literature shows that lenders obtain tax returns from borrowers, and that lenders’ private information is transmitted to equity markets when institutional investors are part of a loan syndicate. I find economically significant increases in tax expense valuation and decreases in tax-related market anomalies following the issuance of institutional syndicated loans, consistent with equity investors finding information about firm performance in tax returns that is useful for their trading decisions. I also document that tax returns are a valuable information source that can motivate institutional investor participation in loan syndicates. This study informs the important, ongoing policy debate over public disclosure of corporate tax return information and extends prior research by showing that investors use information from tax returns incremental to information in financial statements.
Issue Date:2017-04-14
Rights Information:Copyright 2017 Paul Demere
Date Available in IDEALS:2017-08-10
Date Deposited:2017-05

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