The determinants of thinly capitalized tax avoidance structures: evidence from Australian firms

Grantley Taylor; Grant Richardson

doi:10.1016/j.intaccaudtax.2013.02.005

The determinants of thinly capitalized tax avoidance structures: evidence from Australian firms

Grantley Taylor^*, Grant Richardson

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

20 Citations (Scopus)

Abstract

This paper examines the determinants of thinly capitalized structures of publicly-listed Australian firms. Based on a hand-collected sample of 203 publicly-listed Australian firms over the 2006-2009 period (812 firm-years), our regression results indicate that the thin capitalization position of firms is significantly and positively associated with multinationality, tax haven utilization, withholding taxes and tax uncertainty. Multinationality and the use of tax havens are, in particular, strongly associated with thin capitalization. Our additional regression results provide evidence that shows that corporate governance monitoring mechanisms relating to board of director independence, institutional ownership and big-4 auditor utilization are significantly negatively associated with firms adopting thinly capitalized tax avoidance structures.

Original language	English
Pages (from-to)	12-25
Number of pages	14
Journal	Journal of International Accounting, Auditing and Taxation
Volume	22
Issue number	1
DOIs	https://doi.org/10.1016/j.intaccaudtax.2013.02.005
Publication status	Published - 26 Feb 2013
Externally published	Yes

Keywords

Australia
Corporate governance
Tax avoidance
Thin capitalization

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10.1016/j.intaccaudtax.2013.02.005

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abstract = "This paper examines the determinants of thinly capitalized structures of publicly-listed Australian firms. Based on a hand-collected sample of 203 publicly-listed Australian firms over the 2006-2009 period (812 firm-years), our regression results indicate that the thin capitalization position of firms is significantly and positively associated with multinationality, tax haven utilization, withholding taxes and tax uncertainty. Multinationality and the use of tax havens are, in particular, strongly associated with thin capitalization. Our additional regression results provide evidence that shows that corporate governance monitoring mechanisms relating to board of director independence, institutional ownership and big-4 auditor utilization are significantly negatively associated with firms adopting thinly capitalized tax avoidance structures.",

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AB - This paper examines the determinants of thinly capitalized structures of publicly-listed Australian firms. Based on a hand-collected sample of 203 publicly-listed Australian firms over the 2006-2009 period (812 firm-years), our regression results indicate that the thin capitalization position of firms is significantly and positively associated with multinationality, tax haven utilization, withholding taxes and tax uncertainty. Multinationality and the use of tax havens are, in particular, strongly associated with thin capitalization. Our additional regression results provide evidence that shows that corporate governance monitoring mechanisms relating to board of director independence, institutional ownership and big-4 auditor utilization are significantly negatively associated with firms adopting thinly capitalized tax avoidance structures.

KW - Australia

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The determinants of thinly capitalized tax avoidance structures: evidence from Australian firms

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Keywords

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