Research Discussion Papers, Bank of Finland
No 3/2014:
Beauty is in the eye of the beholder: The effect of corporate tax avoidance on the cost of bank loans
Iftekhar Hasan ()
, Chun-Keung (Stan) Hoi, Qiang Wu and Hao Zhang
Abstract: We find that firms with greater tax avoidance incur higher
spreads when obtaining bank loans. This finding is robust in a battery of
sensitivity analyses and in two quasi-experimental settings including the
implementation of Financial Accounting Standards Board Interpretation No.
48 and the revelation of past tax sheltering activity. Firms with greater
tax avoidance also incur more stringent non-price loan terms, incur higher
at-issue bond spreads, and prefer bank loans over public bonds when
obtaining debt financing. Overall, these findings indicate that banks
perceive tax avoidance as engendering significant risks.
Keywords: tax avoidance; cost of bank loans; information risk; agency risk; audit risk; FIN 48; (follow links to similar papers)
JEL-Codes: G21; H26; (follow links to similar papers)
67 pages, January 15, 2014
Before downloading any of the electronic versions below
you should read our statement on
copyright.
Download GhostScript
for viewing Postscript files and the
Acrobat Reader for viewing and printing pdf files.
Full text versions of the paper:
BoF_DP_1403.pdf 
Download Statistics
- This paper is published as:
-
Hasan, Iftekhar, Chun-Keung (Stan) Hoi, Qiang Wu and Hao Zhang, (2014), 'Beauty is in the eye of the beholder: The effect of corporate tax avoidance on the cost of bank loans', Journal of Financial Economics, Vol. 113, July, No. 1, pages 109-130
Questions (including download problems) about the papers in this series should be directed to Minna Nyman ()
Report other problems with accessing this service to Sune Karlsson ()
or Helena Lundin ().
Programing by
Design by Joachim Ekebom
