Media Coverage of Corporate Taxes

• Published in: The Accounting review Vol. 94; no. 5; pp. 83 - 116
• Main Authors: Chen, Shannon, Schuchard, Kathleen, Stomberg, Bridget
• Format: Journal Article
• Language: English
• Published: Sarasota American Accounting Association 01.09.2019
• Subjects: Avoidance behavior; Companies; Corporate taxes; GAAP; Mass media effects; Media coverage; Recessions; Tax avoidance; Tax rates; Taxation; Visibility
• ISSN: 0001-4826; 1558-7967
• DOI: 10.2308/accr-52342

Managers express growing concern over media coverage of corporate taxes, yet no large-sample empirical study examines this phenomenon. As a first step to fill this void, we identify factors associated with the likelihood and negative tone of media tax coverage and examine firms' tax avoidance behavior following media tax coverage. We find the likelihood of media tax coverage is greater for firms with GAAP effective tax rates below the top U.S. statutory rate of 35 percent and for firms with greater visibility. The degree of negative tone is increasing in cash tax avoidance and firm size. We also find evidence of more frequent and more negative tax coverage during economic recessions. We find no evidence that firms reduce their tax avoidance following media coverage. Although our analyses are subject to limitations, our results suggest the media may not have the same influence over corporate tax policy as other external stakeholders.