Tax avoidance and firm value: does qualitative disclosure in the tax footnote matter?

Le Luo, Mark Shuai Ma, Thomas C. Omer, Hong Xie

Research output: Contribution to journalArticlepeer-review


This study examines whether qualitative disclosure in tax footnotes affects the market valuation of tax avoidance activities. We predict that more disclosures in tax footnotes mitigate investors’ concerns over the agency risk of managers engaging in potentially illegal tax avoidance and improve the transparency of firm performance, thus increasing firm valuation. Consistent with the prediction, we find that the market valuation of tax avoidance increases when firms’ tax footnotes disclose more qualitative information related to their tax avoidance activities. We provide several tests to show mechanisms underlying our main findings and mitigate concerns about alternative explanations. Overall, our study suggests that the tax-related disclosures in tax footnotes are useful for investors assessing the value of tax avoidance.

Original languageEnglish
JournalReview of Accounting Studies
StateAccepted/In press - 2023

Bibliographical note

Funding Information:
We are thankful for comments from Jennifer Blouin, Editor, an anonymous reviewer, Jared Moore (Discussant), Jane Zhang (Discussant), and seminar participants at the American Tax Association (ATA) midyear meeting (Phoenix), the American Accounting Association (AAA) annual meeting (San Diego), Oregon State University, Huazhong University of Science and Technology, and Central University of Finance and Economics. Thomas Omer acknowledges support from the Delmar Lienemann Sr. Chair of Accounting. Le Luo acknowledges financial support from the National Natural Science Foundation of China (Grant No. 72272170).

Publisher Copyright:
© 2023, The Author(s), under exclusive licence to Springer Science+Business Media, LLC, part of Springer Nature.


  • Agency costs
  • Firm value
  • Information asymmetry
  • Tax avoidance
  • Tax footnotes

ASJC Scopus subject areas

  • Accounting
  • Business, Management and Accounting (all)


Dive into the research topics of 'Tax avoidance and firm value: does qualitative disclosure in the tax footnote matter?'. Together they form a unique fingerprint.

Cite this