Debt Maturity and Tax Avoidance. Issue 1 (2nd January 2017)

• Record Type: Journal Article
• Authors: Platikanova, Petya
• Is Part Of: European accounting review. Volume 26:Issue 1(2017)
• Page Start: 97
• Page End: 124
• Publication Date: 2017-01-02
• Subjects: Accounting -- Europe -- Periodicals; Accounting -- Periodicals; Comptabilité -- Europe -- Périodiques; Comptabilité -- Pays de l'Union européenne -- Périodiques; 657.094
• DOI: 10.1080/09638180.2015.1106329
• Languages: English
• ISSNs: 0963-8180

Abstract

Abstract: This study proposes and empirically tests the argument that creditors are likely to extend debt with a shorter maturity to tax-avoiding firms so that they can frequently re-evaluate tax-related risk in debt contracting. Using effective tax rates and uncertain tax benefits as a proxy for tax avoidance, I find that tax-avoiding firms have a larger proportion of short-maturity debt compared to other firms. The empirical findings further show that firms with unsustainable tax positions and with subsidiaries in tax-haven countries are more likely to employ short-maturity debt. Collectively, the empirical findings suggest that frequent debt renegotiations increase the exposure of tax-avoiding firms to credit supply shocks, contributing to their higher demand for cash.