@article{0569d9254b494f57a620e12ebbb11db5,
title = "A reexamination of investors' reaction to tax shelter news: Evidence from the Luxembourg tax leaks",
abstract = "This study examines the stock market reaction to the unprecedented leaks of confidential advance tax rulings between Luxembourg and multinational corporations—also known as the “LuxLeaks.” Contrary to the negative market reaction to tax shelter news documented in prior research, we find that investors responded positively to these leaks. This reaction is concentrated among U.S. firms. Furthermore, we document a positive association between abnormal returns and the reduction in firms' tax uncertainty, consistent with a downward revision in investors' perception of the tax uncertainty associated with the firms' Luxembourg operations. We also investigate other firm characteristics and find that, among U.S. firms, investors' reaction is weaker for those over-invested in tax avoidance. Among non-U.S. firms, the market response is muted by concerns about the quality of governance. In summary, our results suggest that investors' reaction to tax shelter news is conditional on their reassessment of the firms' tax uncertainty.",
keywords = "Event study, Luxembourg tax leaks, Tax rulings, Tax uncertainty",
author = "Nesbitt, {Wayne L.} and Edmund Outslay and Persson, {Anh V.}",
note = "The paper has benefited tremendously from comments and suggestions from Robert W. Holthausen (editor) and Lisa De Simone (reviewer). We also thank Rita Gunn (discussant), Ken Klassen, Michelle Nessa, Tom Neubig (discussant), Den Patten, Martin Persson, Dan Wangerin, and participants at the 6th (2016) Annual North American CSEAR Conference, 2016 American Accounting Association Annual Meeting, 2017 Journal of American Taxation Association Conference, and the 107th (2016) National Tax Association Annual Conference as well as workshop participants at Michigan State University for their helpful comments. We gratefully acknowledge generous support from the Eli Broad College of Business at Michigan State University and the Gies College of Business at the University of Illinois at Urbana-Champaign. Finally, we would like to pay tribute to our wonderful mentor and coauthor Ed Outslay (1952–2019). We are forever in debt to his encouragement and guidance. His passion and kindness will live on through generations of inspired students. The paper has benefited tremendously from comments and suggestions from Robert W. Holthausen (editor) and Lisa De Simone (reviewer). We also thank Rita Gunn (discussant), Ken Klassen, Michelle Nessa, Tom Neubig (discussant), Den Patten, Martin Persson, Dan Wangerin, and participants at the 6th (2016) Annual North American CSEAR Conference, 2016 American Accounting Association Annual Meeting, 2017 Journal of American Taxation Association Conference, and the 107th (2016) National Tax Association Annual Conference as well as workshop participants at Michigan State University for their helpful comments. We gratefully acknowledge generous support from the Eli Broad College of Business at Michigan State University and the Gies College of Business at the University of Illinois at Urbana-Champaign. Finally, we would like to pay tribute to our wonderful mentor and coauthor Ed Outslay (1952–2019). We are forever in debt to his encouragement and guidance. His passion and kindness will live on through generations of inspired students.",
year = "2023",
month = apr,
day = "1",
doi = "10.1016/j.jacceco.2022.101537",
language = "English (US)",
volume = "75",
journal = "Journal of Accounting and Economics",
issn = "0165-4101",
publisher = "Elsevier B.V.",
number = "2-3",
}