publication . Article . 2017

Corporate tax avoidance and ex ante equity cost of capital in Europe

Pulido, Matilde; Barros, Victor;
Open Access English
  • Published: 01 Jan 2017
  • Publisher: Instituto Superior de Economia e Gestão
  • Country: Portugal
Abstract
The aim of this paper is to study the longstanding relationship between corporate tax avoidance and ex ante equity cost of capital in Europe, taking into consideration country specific characteristics, which are essential in a context of corporate tax competition. We find that investors apprehend tax avoidance differently at distinct levels of tax avoidance. We provide strong evidence that as low tax avoidance firms engage in greater tax avoidance, the ex ante equity cost of capital decreases. On the contrary, when high-tax avoidance firms undertake greater levels of tax avoidance, the ex ante equity cost of capital appears to increase. The benefits for firms en...
Subjects
free text keywords: Cost of capital, Taxation, Corporate tax avoidance
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Article . 2017
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