Shareholder perceptions of external tax advisors in corporate tax planning

Michael P. Donohoe, Brian T. Gale, Michael A. Mayberry

Research output: Contribution to journalArticlepeer-review


We examine shareholders' perceptions about how external tax advisors contribute to corporate tax planning. As residual claimants of corporate tax planning, shareholders benefit from lower corporate taxes, but also bear the financial and reputational costs of subsequent tax enforcement. Despite the influential advisory role of external tax advisors in corporate tax planning, existing research on how shareholders perceive this role is limited. Using event study methods and exploiting the heightened regulation of tax advice through the covered opinion rules as a setting, we observe average and cross-sectional stock returns consistent with shareholders perceiving external tax advisors as contributing unfavorably to tax planning by promoting excessively risky strategies. We further find that risky and overall tax planning declined across firms after the enactment of the rules, consistent with shareholders' perceptions about tax advisors' contributions to firms' tax planning. Overall, our findings contribute to research on shareholder perceptions and valuation of tax planning, and have important implications for practice, where regulatory oversight of external tax advisors remains a significant concern.

Original languageEnglish (US)
Pages (from-to)1311-1345
Number of pages35
JournalContemporary Accounting Research
Issue number2
Early online dateMar 10 2024
StatePublished - Jun 1 2024


  • covered opinion rules
  • external monitoring
  • tax avoidance
  • tax planning
  • tax professional
  • tax risk


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