Financial analyst coverage and tax avoidance: evidence from the UK
by Mohammad Issa Almaharmeh; Ali A. Shehadeh; Mohammad Aladwan
Global Business and Economics Review (GBER), Vol. 27, No. 3, 2022

Abstract: This paper examines the impact of analyst coverage on corporate tax avoidance strategies. Previous literature suggests different views about the possible relationships linking these phenomena. After examining 3,475 firm-year observations collected from the UK market for the period 2011-2018 the findings suggest that high intensity in analyst coverage leads to increased tax avoidance activities. This result is in line with the 'pressure view', which posits that managers may be more incentivised to reach or exceed earnings expectations to evade the unfavourable consequences of missing analysts' earnings benchmarks. Our results are robust after applying pooled OLS and fixed-effects panel regressions.

Online publication date: Tue, 27-Sep-2022

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