Publication Type

Journal Article

Publication Date

1-2017

Abstract

We investigate whether firms in close customer-supplier relationships are better able to identify and implement tax avoidance strategies via supply chains. Consistent with our prediction, we find that both principal customers and their dependent suppliers avoid more taxes than other firms. Further analysis suggests that principal customers and dependent suppliers likely engage in tax strategies involving shifting profits to tax haven subsidiaries. Moreover, tax benefits appear to explain both principal customer firms’ and dependent supplier firms’ organizational decisions. Overall, our study provides evidence of the importance of tax avoidance as a source of gains from these relationships.

Keywords

Customers, Industrial organization, Suppliers, Supply chain, Tax avoidance

Discipline

Accounting | Corporate Finance

Research Areas

Corporate Reporting and Disclosure

Publication

Journal of Financial Economics

Volume

123

Issue

2

First Page

377

Last Page

394

ISSN

0304-405X

Identifier

10.1016/j.jfineco.2016.09.009

Publisher

Elsevier

Copyright Owner and License

Authors

Additional URL

http://doi.org/10.1016/j.jfineco.2016.09.009

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