We examine how investors value tax avoidance (measured as the level of cash ETRs) and tax risk (measured as the volatility of cash ETRs), and how these constructs interact to influence firm value. Our results suggest that investors positively value tax avoidance but negatively value tax risk...

Effective tax rates (ETRs) are often used to compare tax avoidance across firms and time. Using firms' detailed tax footnote data, we find that the effect of valuation allowances (VA) related to prior-period losses biases GAAP ETRs. This downward bias explains almost all of the downward trend in...

This study investigates the role of tax avoidance in the credit rating process and whether differences exist in how rating agencies account for the risk relevance of tax avoidance. Using a sample of initial credit ratings assigned to public debt issuances during the 1994-2013 period, our...