Do Country Risk Factors Attenuate the Effect of Tax Loss Incentives on Corporate Risk-Taking?

B. Osswald, C. Sureth-Sloane, Do Country Risk Factors Attenuate the Effect of Tax Loss Incentives on Corporate Risk-Taking?, 2020.

Working Paper | Published | English
Author
Osswald, Benjamin; Sureth-Sloane, CarenLibreCat
Abstract
This study investigates whether country risk factors, including political and fiscal budget risk, attenuate the effectiveness of tax policy tools that aim to encourage corporate risk-taking. Exploiting a cross-country panel, we predict and find that the effectiveness of loss offset rules and tax rate changes is fully attenuated for firms located in high-risk countries. We document the attenuating effect of country risk is more pronounced in high-tax countries or when countries increase their corporate tax rate. Additional tests around the U.S. federal budget crises from 2011 to 2013 indicate that temporarily heightened fiscal budget risk attenuates the effectiveness of loss offset rules even in countries with low political risk. We identify conditions (low political and low fiscal budget risk) under which targeted tax policy tools effectively stimulate risk-taking. This suggests that ensuring taxpayers receive tax refunds is important in times of economic crises with budgetary or political challenges.
Publishing Year
Volume
TRR 266 Accounting for Transparency Working Paper Series No. 28
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Osswald B, Sureth-Sloane C. Do Country Risk Factors Attenuate the Effect of Tax Loss Incentives on Corporate Risk-Taking? Vol TRR 266 Accounting for Transparency Working Paper Series No. 28.; 2020. doi:10.2139/ssrn.3297418
Osswald, B., & Sureth-Sloane, C. (2020). Do Country Risk Factors Attenuate the Effect of Tax Loss Incentives on Corporate Risk-Taking? Vol. TRR 266 Accounting for Transparency Working Paper Series No. 28. https://doi.org/10.2139/ssrn.3297418
@book{Osswald_Sureth-Sloane_2020, title={Do Country Risk Factors Attenuate the Effect of Tax Loss Incentives on Corporate Risk-Taking?}, volume={TRR 266 Accounting for Transparency Working Paper Series No. 28}, DOI={10.2139/ssrn.3297418}, author={Osswald, Benjamin and Sureth-Sloane, Caren}, year={2020} }
Osswald, Benjamin, and Caren Sureth-Sloane. Do Country Risk Factors Attenuate the Effect of Tax Loss Incentives on Corporate Risk-Taking? Vol. TRR 266 Accounting for Transparency Working Paper Series No. 28, 2020. https://doi.org/10.2139/ssrn.3297418.
B. Osswald and C. Sureth-Sloane, Do Country Risk Factors Attenuate the Effect of Tax Loss Incentives on Corporate Risk-Taking?, vol. TRR 266 Accounting for Transparency Working Paper Series No. 28. 2020.
Osswald, Benjamin, and Caren Sureth-Sloane. Do Country Risk Factors Attenuate the Effect of Tax Loss Incentives on Corporate Risk-Taking? 2020, doi:10.2139/ssrn.3297418.
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