Title: Tax risk and stock return volatility: case study for French firms
Author: Soufiene Assidi
Address: Accounting Department, CBA, University of Jazan, P.O. Box 114, Jazan, Kingdom of Saudi Arabia
Abstract: The purpose of this paper is to address the relationship between tax risk and the stock return volatility for listed French firms. The context of this research is the connection between accounting and taxation for listed French firms. This research is based on a sample of 40 French listed firms from 2009 to 2013; these companies are not from the financial sector. The result is consistent with the literature which suggests that tax risk activities increase a firm's risk. We find, also, that a positive relationship between the accruals and stock return is due to the managers' decisions to reduce the amount of tax rates by making favourable interpretations of tax laws. We find, also, a negative relationship between the debt and stock return and this is explained by the increase of debt representing a risk to the firm. In addition, this study can be the object of replications in other contexts. This paper's findings contribute to the sparse literature on tax risk and stock return volatility in French management practices. The findings could improve the management relationship between tax and accounting.
Keywords: stock return volatility; effective tax rates; tax risk; accruals; firm size; stock returns; case study; France; accounting; taxation; tax laws; debt.
Int. J. of Business Continuity and Risk Management, 2015 Vol.6, No.2, pp.137 - 146
Submission date: 20 May 2015
Date of acceptance: 11 Nov 2015
Available online: 04 Apr 2016